Fuel prices remain unchanged as regulator ignores court ruling on VAT

Fuel prices will remain unchanged for the next month.

The Energy and Petroleum Regulatory Authority (Epra) also retained value-added tax on petroleum products at 16 per cent despite the Court of Appeal ruling that the Finance Act, 2023 is unconstitutional.

The Act increased VAT on fuel to 16 per cent from eight per cent. Industry players had noted that reducing VAT to eight per cent would have had a significant impact on pump prices.

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“In the period under review, the maximum allowed petroleum pump price for super petrol, diesel and kerosene remain unchanged,” said Epra in a statement on Wednesday evening.

“The prices are inclusive of 16 per cent VAT in line with provisions of the Finance Act, 2023.”

The Court of Appeal on July 31 ruled that the Finance Act, 2023 was unconstitutional, upholding a similar ruling by the High Court.

The Act, which came into force in July last year had increased the cost of petroleum products by doubling VAT to 16 per cent from the earlier eight per cent.

The ruling by the Court of Appeal would mean that VAT on fuel would revert to eight per cent.

The government appealed the decision at the Supreme Court and had also requested a stay order as the case was heard and determined but the Court rejected National Treasury’s plea.

A stay order would have meant that the government would continue collecting taxes introduced by the Finance Act, of 2023, including VAT on fuel at 16 per cent.

The rejection of the plea has since thrown taxpayers into confusion following the failure of KRA to align its systems with the ruling.

The Federation of Kenya Employers last week noted that KRA had not adjusted its tax systems to reflect the ruling by the Court of Appeal, adding that this had its members and other taxpayers are unable to remit taxes “in accordance with the judgement for reason that the KRA has not yet configured its systems to comply with the Court of Appeal judgement.”

The Petroleum Outlets Association of Kenya (Poak) earlier yesterday noted that the industry is “keen to see the revision of the VAT from 16 per cent to eight per cent.”

This, the lobby for small and mid-sized oil marketers in the country had noted, would “reduce the pump prices significantly”.

Wednesday's price capping guide is the second since the substantial hike in the Road Maintenance Levy.

The Transport Ministry in July, just days before Epra announced fuel prices for the July-August cycle, increased the levy by Sh7 to Sh25 from Sh18.

The levy is used by road agencies to undertake repairs of roads across the country.

Kenyans have protested that the levy was hiked without proper consultation and also without considering the plight of Kenyans who are currently grappling with the high cost of living and stagnant or reduced incomes.

Earlier Wednesday, the new Energy and Petroleum Cabinet Secretary Opiyo Wandayi took over the key docket, saying among his areas of priority would be to look into ways to bring down the cost of both fuel and electricity.

“We have a cardinal duty to ensure that we provide services in the energy realm that are affordable, sustainable, reliable to the people,” he said, adding he would work to systematically reduce the cost of both fuel and electricity.