, NAIROBI, Kenya, Sep 13 – The National Treasury has directed the Kenya Revenue Authority (KRA) to immediately pursue unscrupulous traders who are adjusting their prices in the pretext of charging Value Added Tax on goods which are exempted from VAT.
National Treasury Cabinet Secretary Henry Rotich says any trader found contravening the provisions of the new VAT Act will be liable to prosecution and penalties under the law.
He clarified that items exempted from VAT include all unprocessed foods such as vegetables, maize, beans, milk, eggs and beans.
Additionally, processed foods such as wheat and maize flour and bread are VAT exempt as are medicines, pharmaceuticals, sanitary pads, fertilizers, selected seeds that include maize seeds among others.
“Traders selling such groups are warned that it is illegal to charge VAT on such commodities since they are exempt from VAT and further more it is an offence to charge VAT if one is not registered for VAT with KRA,” he said.
He says any persons charging VAT should produce an approved receipt generated through an electronic tax register showing the amount of VAT charged.
“The reason that persuaded us to embark on the reform of VAT Act is because we needed to address the challenges experienced and reported by taxpayers, including lack of clarity of the law and high cost refund backlog,” he said.
He said the Act was also meant to address the high compliance cost as reported, for several consecutive years, in paying tax reports.
“We also needed to address the complexity of the law occasioned by several amendments and exponential increase in items under exempt and zero-rating lists,” he said.
He said that revenue yielded from VAT declined annually from the high of about 10 percent as a share of GDP to about six percent by end of 2012- 2013 financial year.
Rotich says VAT is to be charged only to those businesses registered for the purpose and whose annual turnover is at least Sh5 million.
This comes as the Deputy President William Ruto also warned traders against taking advantage of the recently introduced VAT to extort consumers by increasing prices of basic commodities.
He said it was not justified to increase prices of VAT exempt commodities adding that the government will take strong action against those fleecing buyers.
Ruto said that traders should not raise the prices of VAT-exempt goods.
“The issue of increasing the prices of basic goods does not arise because VAT did not affect basic necessities”, he said.
Ruto was speaking at Karatina town on his way to officially open this year’s Central Agricultural Show held at Kabiruini grounds in Nyeri on Friday.