House team keeps essential goods out of VAT bracket

 

A section of the Members of the National Assembly. Photo/STEPHEN MUDIARI  NATION MEDIA GROUP

By EDWIN MUTAI

In Summary

• The Finance, Trade and Planning committee has proposed milk, rice and wheat flour continue to be zero rated.

A Parliamentary committee has resolved to keep essential goods out of the Value Added Tax net, dealing a killer blow to Treasury’s hopes of raising Sh10 billion by removing exemptions on more than 400 items.

With the Cabinet already having agreed to retain exemptions on maize flour and bread, the Finance, Trade and Planning committee has proposed milk, rice and wheat flour continue to be zero rated.

“We are going to exempt or zero rate basic food commodities, infant milk and food preparations for infants, medicaments, books, sanitary towels, mosquito nets, newspapers, journals and periodicals,” said committee chairman Benjamin Lang’at.

The committee published the Bill drafted by the Treasury for debate on Thursday. The Bill seeks to reduce to 27 the number of goods that are either zero rated or exempted from paying VAT.

All other products would be charged the standard 16 per cent consumer tax including electricity which has previously been charged 12 per cent.

(Read: Bread, flour set for VAT exemption as lobbying heats up)

The committee has asked Parliament to remove unprocessed milk from the list of exemption because hawking of the commodity is prohibited under the Dairy Act.

If the proposals are passed by the House, Kenya Airways would be spared the tax on aircraft, their spare parts, jet fuel and aviation spirit. Drugs and medical equipment, farm inputs, kerosene, deceased persons effects, lifesaving apparatus, marine vessels, rewards earned by sportsmen and capital equipment for generation of electricity remain exempt.

Spacecraft, aircraft launching gear, deck-arrestors, air combat simulators and ground flying trainers would also remain VAT free in a bid to keep Kenya Defence Forces costs manageable.

Goods provided under the Armed Forces Canteen Organisation (Afco) would also not attract the consumer tax.

The committee also proposed to reinstate ambulance services landing, parking and navigation services for aircraft, transportation of tourists, tour operators, travel agents and flower auctions out of the tax net.

But the President who enjoys tax free goods and services would start paying VAT in line with the constitutional requirement that every Kenyan pays taxes.

Companies which have been granted licences for geothermal power generation and supply would also be spared the VAT if the proposals are adopted.

Mr Langat said the decision considered representations from consumer groups, tourism industry stakeholders, aviation, Kepsa, Kippra and ordinary Kenyans.

Should the committee push through its amendments, Kenya Revenue Authority timelines to deduct input tax, refund tax paid in error, examine taxpayer tax records and refund outstanding VAT claims would be shortened.