Solar professionals, operating under the umbrella of Solar Professionals Kenya, have raised concerns over the government's decision to introduce Value Added Tax (VAT) on solar products in the Finance Bill 2025.
The solar professionals, led by Engineer Victor Okunu, warned that traders in solar-related products may be forced to adjust their prices to recover the VAT-related losses, passing the cost on to consumers. According to Okunu, traders will raise the markup prices of the crucial goods beyond the 16 per cent, making them beyond reach.
Further, the professionals raised concerns about what they termed as a deliberate attempt to discourage Kenyans from switching to renewable energy sources.
''Traders will need to increase prices to cover the 16 per cent, and the final cost could rise by even more,'' Okunu stated in an interview with Kenyans.co.ke on Sunday.
"Does adding 16 per cent VAT on solar mean the government wants to stop Kenyans from migrating to solar? Or is this a plan to keep Kenyans dependent on KPLC?'' he asked.
Previously, solar equipment such as panels and lithium-ion batteries were zero-rated for VAT, meaning they attracted 0 (zero) per cent VAT and allowed suppliers to claim input VAT credits. The Finance Bill 2025 proposes shifting these items to VAT-exempt status.
Under the exemption, while the products will not be taxed directly, suppliers can no longer claim input VAT, potentially raising the overall cost of these goods.
The Bill also proposes to standard-rate inputs for solar, wind, and geothermal energy, removing them from their current zero-rated status. This would subject them to the 16 per cent VAT rate, further increasing the cost of implementing renewable energy projects.
The reclassification from VAT zero-rated to tax-exempt has become a key point of concern. While both categories relieve consumers of VAT, the exempt status prevents suppliers from reclaiming input VAT, unlike the current zero-rated system that helps maintain affordable pricing through supply chain efficiency.
This change is expected to either drive up consumer prices or reduce profit margins for suppliers. Solar Professionals Kenya has warned that the proposals could derail the country’s clean energy transition and place additional financial strain on households.
For instance, a basic solar home setup currently costing Ksh50,000 could rise to Ksh58,000 once the 16 per cent VAT is applied. A 100W panel retailing at Ksh12,000 would shoot up to Ksh13,920, while a lithium-ion battery priced at Ksh25,000 would go for Ksh29,000.
Industry players warn that such price hikes could slow the adoption of clean energy, especially among low-income households that rely on solar to power homes in off-grid areas.
Meanwhile, the solar professionals have made submissions to Parliament, seeking to have the proposal dropped. However, it remains unclear whether the legislators will side with the solar industry or not.
