Treasury to scrap VAT on renewable energy products

Water boiler with solar panels on roof of house in village of Madeira in Portugal.[Getty Images]

The government is set to repeal taxes on renewable energy products that were to take effect in the next financial year in a move likely to reduce the cost of clean energy.

National Treasury Chief Administrative Secretary Nelson Gaichuhie told Senators on Thursday that the 14 per cent value-added tax (VAT) imposed on off-grid solar panels, direct current inverters and storage batteries in Finance Bill, 2020 would be repealed. 

“The National Treasury has proposed in the Finance Bill, 2021 that items like direct current inverters and storage batteries used in solar energy be exempted, which will also be an incentive to the other clean energy like wind,” he said. 

The reversal will be a welcome boost to the clean energy sector following last year’s move by the government, which drew criticism from stakeholders.

“This imposition of VAT entrenches the marginalisation of Kenyans living in lower-income and rural communities, the majority of whom live off the national grid and access their energy needs through solar power,” said an industry lobby, Kenya Renewable Energy Association (Kerea) in a statement last year urging the president to remove the tax.

“During the Covid-19 pandemic, Kenyans without electricity are less able to access basic health, safety and education information via radio, television or telephone and do not have power to support local enterprise.”

Treasury further said the proposals to exempt clean energy products from the tax has been in the Finance Bill for the past two years. 

“As the National Treasury, we only propose it in the Finance Bill but the ultimate answer comes from parliament,” Mr Gaichuhie said.

He, however, said the Bill is still at early stages of preparation with several other policies on the cards.

Frankline Sunday