Kenyans may start buying locally assembled phones at a cheaper price if the proposals by the East Africa Devices Assembly Kenya Limited (EADAK) are adopted.
EADAK is pushing for a Value Added Tax (VAT) exemption on imported inputs used in assembling local mobile phones, arguing that the current tax structure could drive prices up.
Speaking during the public hearings on the Finance Bill 2025 on Tuesday, the experts warned that in its current form, the Bill only exempts VAT on locally assembled phones but retains VAT on the raw materials used in the assembly process.
This, according to them, means manufacturers cannot reclaim the VAT paid on inputs, turning it into an unrecoverable expense that will increase production costs and ultimately raise consumer prices.
''EADAK proposes that while locally assembled mobile phones should be exempted from VAT, imported inputs or raw materials used by approved local assemblers and manufacturers for these phones should also be VAT-exempt,'' the proposal reads in part.
Currently, Kenyans are purchasing locally manufactured phones at prices starting from Ksh7,499, phones produced by EADAK.
But the manufacturers are now arguing that this price might increase if the Finance Bill is not amended.
EADAK argues that the current proposal in the Finance Bill, 2025, to exempt locally assembled phones from VAT but retain standard VAT on inputs will increase production costs, leading to higher consumer prices.
''If only the output is exempt and input is subject to VAT, the consumer pays a higher price due to the embedded irrecoverable VAT, whereas if both input and output are VAT exempt, the consumer pays the same lower price as a zero-rated sale,'' the assemblers told the National Assembly.
The proposals come at a time when President William Ruto has championed the local manufacturing of smartphones as part of Kenya’s digital transformation agenda.
The President emphasized that affordable smartphones are crucial for expanding internet access, mobile banking, and e-commerce, ensuring that more Kenyans can participate in the digital economy.
Ruto stated that the goal was to manufacture smartphones costing less than Ksh5,000, making Kenya home to the cheapest smartphones in Africa. However, as it is, the Finance Bill 2025 is derailing this dream.
