Kenyans to pay more for cooking gas beginning July

The cost of living for many Kenyans in urban centres could rise in the second half of this year after KRA stated that Value Added Tax (VAT) on cooking gas will be re-introduced on July 1.

Since mid-2016, Kenyans have been buying liquefied petroleum gas, popularly known as cooking gas, at costs that exclude VAT. In that year, the then-16 per cent VAT imposed on the product was removed.

However, the Finance Act 2020 re-introduced the taxes, but the implementation of the charges was deferred to the second half of 2021 due to the Covid-19 crisis.

Now, revenue collector, KRA, says the plan to have VAT imposed on LPG remains on course, and that the levies will take effect on July 1.

In an interview with Standard Digital on Wednesday, April 21, a representative of the taxman confirmed that the VAT will begin applying on the cooking gas from July 1 following the amendment of the Finance Act 2020 which was amended by deleting LPG including propane from the list of zero-rated items under the Second Schedule to the VAT Act.

"This means the supply of Liquified Petroleum Gas will be subjected to VAT at the standard rate of 16 per cent from July 1, 2021," said KRA.

KRA added that the move is aimed at boosting revenue collection.

“We cannot at the moment, provide a reliable estimate on the revenue expected to be raised from the imposition of VAT on LPG,” the taxman’s rep told the outlet.

What it means

For the households using Total gas, refilling the small 6-kg cylinder currently refilled at Sh1,050 will cost Sh168 more, the 13-kg cylinder will cost Sh360 on top of the current Sh2,250, while the 22-kg cylinder will cost Sh626 on top of the current Sh3900.

Refilling the 50-kg cylinder will cost Sh1,384 more on top of the current Sh8,650.

For those using Hashi gas, the new VAT will increase the price of a kilogramme of gas currently from Sh115 to Sh133.4.

Therefore, you will pay Sh798 to refill a 6-kg cylinder and 1,729 to refill a 13-kg cylinder. This is from the current Sh690 for a 6-kg cylinder and 1,495 for a 13-kg cylinder.

In Nairobi, a 6-kg cylinder will retail at Sh2,800 from Sh2,490 while the 13-kg cylinder will be Sh5,342 from Sh4, 295.

Those living in Mombasa will pay Sh2,808 for a 6-kg cylinder from Sh2,390 and 5,342 for a 13-kg cylinder from Sh4, 295.

The new tax was reintroduced by the National Treasury in July 2020 during the review of the Bill but requested that it be delayed by at least one year for smooth implementation.

The Treasury pleaded with members of the Finance Committee, who were opposed to the gas levy to support it on condition that the implementation be delayed by a year.

The MPs had warned the new charges would push more households to use pollutant fuel such as kerosene and charcoal for cooking.

The MPs also cited Covid-19 adverse effects as justification for the implementation delay.

Zero-rated costs

Kenyan households have paid low prices for cooking gas since June 2016 after the Treasury scrapped VAT on LPG to cut costs and reduce the use of kerosene and charcoal.

The cost of gas, however, has been on the rise since 2017 and has wiped out the tax benefits that came with the scrapping of VAT.