KRA loses Ksh.9.1 billion after fuel VAT cut to 8%

Speaking before the Senate Standing Committee on Energy, KRA Commissioner for Customs and Border Control, Dr. Lilian Nyawanda, said the tax relief measure was introduced to cushion consumers and businesses from the impact of rising global fuel prices.

Dr. Nyawanda noted that the reduction in VAT was part of broader government interventions aimed at stabilising fuel prices and easing the cost-of-living burden on Kenyans amid volatile international oil markets.

The Commissioner also addressed concerns surrounding the Premium Motor Spirit (PMS) consignment delivered by the vessel MT PALOMA, which is currently under investigation.

She clarified that the consignment did not enter the Kenyan market and was instead re-shipped to other destinations.

According to Dr. Nyawanda, customs entries linked to the consignment have since been cancelled, while taxes amounting to Ksh.5.1 billion paid by various Oil Marketing Companies (OMCs) through the principal importer, MT PALOMA, will be transferred to customs declarations for subsequent fuel consignments.

She further explained that KRA continues to play a critical role in supporting the uninterrupted supply of petroleum products in the country through efficient customs administration and trade facilitation.

"KRA supports the petroleum supply chain through the expeditious processing of import documentation, timely assessment and collection of duties, VAT, levies and other statutory charges, as well as the prompt release of cargo at petroleum depots in Mombasa and across the country," said Dr. Nyawanda.

The Commissioner emphasised that KRA's role in the petroleum supply chain is limited to its statutory mandate, including customs clearance, tax assessment, levy collection, transit control and trade facilitation.

She maintained that the Authority remains committed to facilitating legitimate trade, ensuring compliance with customs and tax laws, and supporting government interventions aimed at safeguarding the country's economic interests while maintaining an efficient and secure petroleum supply chain.

In April, President William Ruto announced the reduction of VAT on fuel products to 8 per cent to cushion Kenyans from high fuel prices, citing that the directive would be implemented for the next three months.