, NAIROBI, Kenya, Sep 6 – A High Court in Bungoma has suspended implementation of the 16 per cent Value Added Tax (VAT) on petroleum products following an application by three petitioners.
While granting the conservatory orders, Justice Stephen Nyangau Riechi, on Thursday directed the petitioners – Titus Alila, Jackline Otieno, and Francis Ogada – to appear before the High Court in Kisumu on Wednesday next week for mention.
In their application, the petitioners faulted the Energy Regulatory Commission (ERC) and National Treasury Cabinet Secretary Henry Rotich for allowing implementation of the new tax charge on fuel under the Finance Act (2013).
The VAT on fuel had come into effect on Saturday after a period for which the provision for the tax in the Finance Act (2013) had been suspended lapsed.
In a last-minute rush to further defer the coming into force of the tax charge on fuel, the National Assembly had on Thursday passed a Finance Bill (2018) which sought to further postpone the implementation of VAT on fuel for another two years.
The Finance Act (2013) had originally deferred the VAT provision for three years with the National Assembly voting to extend the suspension for another two years in 2016.
ERC issued an advisory for new fuel prices on Saturday after the Act came into force.
The new tax charge however triggered chaos in the petroleum sector with wholesalers allied to the Kenya Independent Petroleum Distributors Association (Kipeda) Holdings Limited staging protests at fuel depots that had by Wednesday resulted into acute fuel shortages in major cities.
Following the protests, ERC cancelled a licence issued to Kipeda Holdings Limited, an entity responsible for the wholesale of petroleum products in the country, citing economic sabotage.
According to ERC, the firm was behind an elaborate intimidation scheme that has seen fuel transporters stage a strike over the implementation of the 16 per cent VAT on petroleum products.
In a statement Wednesday evening, ERC cited Section 85 of the Energy Act (2006) in revoking the licence held by KIPEDA Holdings Limited.
“The Commission wishes to inform members of the public that the action by Kipeda Holdings Limited amounts to economic sabotage and hereby cancels the licence of the said licensee pursuant to Section 85 of the Energy Act No. 12 of 2006,” ERC stated.
“Kipeda Holdings Limited is therefore no longer licenced to carry out import, export and wholesale of petroleum products,” ERC announced.
The energy regulator issued another statement on Thursday dismissing claims of erroneous computation of new fuel prices following the coming into effect of the 16pc tax.
ERC said the current fuel prices were correctly reviewed in consultations with the National Treasury.
The commission restated that the current fuel prices will remain as are dismissing reports of an impending review as misleading.
The Kenya Revenue Authority (KRA) had confirmed the application of the 16 per cent VAT in a statement on Saturday saying the period for which the Finance Act (2013) had been suspended had lapsed.
“The changes are contained in the Finance Act 2013 which extended the exemption for three (3) years. Further, the exemption was extended by two more years under the Finance Act 2016. Consequently, the VAT charge on petroleum products has now come into effect,” Commissioner General John Njiraini said in a news release.
Njiraini directed fuel dealers to submit VAT returns to KRA by October 20.
“KRA has advised importers, depots, distributors and retailers, including pump stations, to charge, account and submit returns on the same to KRA by 20th of the succeeding month,” he said.