Inflation Adjustment on Specific Rates of Excise Duty

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November 2021

Inflation Adjustment on Specific Rates of Excise Duty

Introduction

The Excise Duty Act, 2015 (the Act) changed the excise duty structure from ad valorem to specific, save for food supplements, motor vehicles and cosmetics. The use of specific duty rates gives the Kenya Revenue Authority (KRA) the opportunity to adjust the excise duty rates to take into account inflationary pressures and respond to changes in the economy. Section 10 of the Act confers powers to KRA to adjust, the Excise Duty rates of products with specific rates of Excise Duty, annually, to take into account the rate of inflation, subject to the approval of the Cabinet Secretary National Treasury and Planning.

The rates of excise duty on excisable goods that have a specific rate of duty, were adjusted using the average inflation rate for the 2020/2021 financial year of 4.97% as required under Section 10 of the Act, effective 2nd November 2021.

 

Legal Notice No.217 of 2021

The adjusted rates were gazetted under Legal Notice No.217 of 2021. The list of the goods affected is provided below:-

Description Old Rate of Excise

Duty

New Rate of Excise

Duty

Fruit juices (including grape must), and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter

 

Sh. 11.59 per litre

 

 

Sh. 12.17 per litre

 

 

Bottled or similarly packaged waters and other non-alcoholic beverages, not including fruit or vegetable juices

 

Sh. 5.74 per litre

 

Sh. 6.03 per litre

 

Beer, cider, perry, mead, opaque beer and mixtures of fermented beverages    with non-alcoholic beverages and spirituous beverages of alcoholic strength     not exceeding 6%

 

Sh. 116.08 per litre

 

 

Sh. 121.85 per litre

 

 

Powdered beer

 

Sh. 116.08 per kg

 

Sh.121.85 per kg

 

Wines including fortified wines, and other alcoholic beverages obtained by fermentation of fruits

 

Sh. 198.34 per litre

 

Sh. 208.20 per litre

 

Spirits of undenatured ethyl alcohol; spirits liqueurs and other spirituous beverages of alcoholic strength exceeding 6%

 

Sh. 265.50 per litre

 

Sh. 278.70 per litre

 

Cigars, cheroots, cigarillos, containing tobacco or tobacco substitutes

 

Sh. 13,247.63 per kg

 

Sh. 13,906.04 per kg

 

Electronic cigarettes

 

Sh. 3,974.08 per unit

 

Sh. 4,171.59 per unit

 

Cartridge for use in electronic cigarettes

 

Sh. 2,649.74 per unit

 

Sh. 2,781.43 per unit

 

Cigarette with filters (hinge lid and soft cap)

 

Sh. 3,312.96 per mille

 

Sh. 3,477.61 per mille

 

Cigarettes without filters (plain cigarettes)

 

Sh. 2,384.24 per mille

 

Sh. 2,502.74 per mille

 

Other manufactured tobacco and manufactured tobacco substitutes; “homogenous” and “reconstituted tobacco”; tobacco extracts and essences

 

Sh. 9,273.55 per kg

 

Sh. 9,734.45 per kg

 

Motorcycles of tariff no. 87.11 other than motorcycle ambulances and locally assembled motorcycles

 

Sh. 11,608.23 per unit

 

Sh. 12,185.16 per unit

 

Imported sugar confectionary of tariff heading 17.04

 

Sh. 35 per kg

 

Sh. 36.74 per kg

 

White chocolate, chocolate in blocks, slabs or bars of tariff nos. 1806.31.00, 1806.32.00, and 1806.90.00

 

Sh. 209.88 per kg

 

Sh. 220.31 per kg

 

Products containing nicotine or nicotine substitutes intended for inhalation without combustion or oral application but excluding medicinal products approved by the Cabinet Secretary responsible for matters relating to health    and other manufactured tobacco and manufactured tobacco substitutes that  have been homogenized and reconstituted tobacco, tobacco extracts and  essences Sh. 1,200 per kg

 

 

Sh. 1,259.64 per kg

 

 

 

High Court Order on Inflation Adjustment on Specific Rates of Excise Duty

The High Court has halted the implementation of adjustment of prices on specific rates of excise duty on excisable goods as gazetted by KRA under Legal Notice No.217 of 2021, effective 2nd November 2021. The case was filed by advocate Mwaura Kabata who averred that consumers would experience financial constraints due to the increased tax pressure. Furthermore, the petitioner contended that the taxman actions to adjust the inflation rate was not based on research findings and the authority had “blindly borrowed” from previous existing rates and if left untamed would occasion business collapse due to reduced returns by affected enterprises.

High Court Justice James Makau has directed KRA to maintain status quo, pending the determination of the case filed by the petitioner. The High Court direction offers temporary reprieve for Kenyans who are consumers of the products targeted by the inflation adjustment of excise duty.

Way Forward

As we await High Court ruling over the matter, we encourage all companies that deal in excisable goods to take note of the new rates and plan their activities accordingly. We are available to assist in reviewing your operations to ensure continued compliance with excise duty and other taxes.

Please do not hesitate to contact us, should you require further guidance and assistance as necessary.

 

Moses Mwendwa             Managing Director                             mmwendwa@czmkenya.com

Benson Njiru                     Director, Advisory & Tax                  benson.njiru@czmkenya.com

Betty Komen                     Tax Associate                                 bettykomen@czmkenya.com

Martin Mugo                     Tax/Legal Intern                              edwinmugo165@gmail.com

 

This publication constitutes only a brief guide and is not intended to be a comprehensive summary of the Act nor the tax law and practice. No one should act on this publication without appropriate professional advice, following a thorough examination of their particular situation. While all reasonable care has been taken in the preparation of this guide, HLB Cezam accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise, or for any loss, however caused or sustained by any person that relies on it.

 

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