Motorists and transporters should now brace for a fresh spike in the cost of living after lawmakers backed the doubling of Value Added Tax (VAT) on fuel and an increase in advance tax on commercial vehicles.
The National Assembly Committee on Finance and National Planning approved proposals in the Finance Bill 2023, doubling VAT on fuel to 16 percent and more than doubled advance tax on commercial vehicles to a cap of Sh5,000.
Doubling of VAT will see a litre of fuel edge near the Sh200-mark, triggering fresh inflationary pressures as manufacturers, service providers and thermal electricity generators pass the increased costs to consumers in the form of higher consumer prices.
The committee has also backed an increase in advance tax on buses, saloon cars and other passenger vehicles from Sh60 per seat or Sh2,400 annually to Sh100 or Sh5,000 per year whichever is higher, setting the stage for a rise in fares and costs of ferrying goods and agricultural produce.
The two proposals, if adopted before the end of this month, will inflict more pain on Kenyans given that they directly increase the costs of transport and stoke inflationary pressure.
“The existing VAT rates were not standard and thus the committee intends to harmonise the rate to 16 percent including for petroleum products,” the committee says in its report to the House.
A similar proposal to raise the advance tax on lorries, trucks and pick-ups from Sh1,500 per tonne or Sh2,400 whichever is higher to Sh3,000 per tonne or Sh5,000, whichever is higher, will trigger higher charges in the logistics sector.
