The Finance Bill 2024, has proposed exemption from tax for key products and services as a way of reducing the cost of living.
The proposals if adopted by the parliament will form the basis of President William Ruto’s administration tax policy that aims to raise revenue for the funding of the 2024/25 financial year budget.
It should be noted that some of the products that are now exempt were zero-rated in the 2023 Finance Act have now been categorised as exempt.
Zero-rated meant that while the retail goods cannot be taxed, suppliers can still claim value-added tax (VAT) paid on inputs while in exemption there is no taxation but also no claim of refund for the VAT on inputs.
Goods and services that were zero-rated but are now exempted include; The supply of motorcycles of tariff heading 8711.60.00, and the supply of ordinary bread,
Additionally, milk and cream, not concentrated nor containing added sugar or other sweetening matter has been moved from zero-rated to exempted.
“All inputs and raw materials whether produced locally or imported, supplied to manufacturers of agricultural pest control products upon recommendation by the Cabinet Secretary for the time being responsible for agriculture,” the Finance Bill further stated on the proposal to move products from zero-rated to exempt.
Agricultural pest control, the supply of maize (corn) flour, cassava flour, wheat or meslin flour, and maize flour containing cassava flour by more than 10 per cent weight and inbound international sea freight offered by a registered person also fall under this category.
While moving from zero-rated to exempt does not necessarily guarantee the reduction of prices, the Kenya Kwanza has proposed further exemption of goods that had initially been subject to tax.
These include; micronutrient foliar feeds and bio-stimulants, tea packaging material as well mosquito repellents.
It should be noted that the supply of denatured ethanol, plain polythene film, and pressure-sensitive adhesive will no longer be exempted from tax.
Services imported or produced locally for use by the local film producers or local film agents upon recommendation by the Kenya Film Commission, subject to approval by the Cabinet Secretary for the National Treasury will also no longer be exempted.
