Finance Bill 2023: Goods That Are Tax Exempted

Ruto and Njuguna
A photo collage of Treasury Cabinet Secretary Njuguna Ndung'u (Left) and President William Ruto (Right).

Treasury Cabinet Secretary Njuguna Ndung'u, on Thursday, May 4, presented Finance Bill 2023, which imposed some of the stiffest tax regimes ever but also granted much-needed relief to specific goods. 

President William Ruto's administration fulfilled one of his promises of exempting Liquefied petroleum (LPG) gas from taxation. 

On Friday, February 24, 2023, the head of state pledged that his administration would ensure that every Kenyan household has access to cooking gas by making it affordable.

"Every Kenyan household will have access to cooking gas, and we will ensure that gas prices reduce by removing all taxes on cooking gas. 

President William Ruto at the Kenya-Japan press briefing, in State House, Nairobi, on May 3, 2023.
A photo of President William Ruto at the Kenya-Japan press briefing, in State House, Nairobi, on May 3, 2023.

"So that we can make sure that every household in the republic of Kenya has access to gas for cooking and we can eliminate the use of wood fuel, the challenges of health and also restore our environment," Ruto stated.

CS Njuguna is seeking an amendment to Section 43 of the Value Added Tax Act, 2013, to exempt LPG gas from taxation. 

"The rate of tax shall be in the case of a zero-rated supply, in the case of the supply of liquefied petroleum gas including propane," Finance Bill 2023 read in parts. 

Speaking in Dongo Kundu in Mombasa county, the Head of State cautioned retailers using illegal cylinders to sell cooking gas at exorbitant prices. 

CS Njuguna also wrote to Parliament asking them to amend the Schedule to the Value Added Tax Act, 2013, to exempt fertilizer from taxation. 

"Inputs or raw materials locally purchased or imported by manufacturers of fertilizer as approved by the Cabinet Secretary responsible for matters relating to agriculture are exempted," read part of the Finance Bill 2023. 

Treasury's proposal was based on President William Ruto's Mashujaa Day, October 20, 2022, promise when he assured farmers of continued government intervention for the availability of cheaper fertilizers.

Speaking during the 59th Mashujaa Day celebrations at Uhuru Gardens, Ruto stated that he would remove taxes on fertilisers. 

Ruto's administration had imported 1.5 million 50kg bags of fertiliser and made it available at a subsidised price across the country for the short rainy season.

Maize Flour on Supermarket shelves
Maize Flour on a supermarket shelf on April 4, 2023.
Ken Aseka

“We have made arrangements to make another six million bags of various types of fertilisers available for the long rainy season.

“We have asked county governments to work with us on the last mile deliveries to centers close to farmers so that fertilisers can be easily accessible,” Ruto stated.

Tax exemption is a legal provision that allows certain individuals or organisations to be exempted from paying certain types of taxes or paying taxes altogether.

The exemption may be granted for various reasons, such as to promote specific social, economic, or environmental goals.

Governments may grant tax exemption to non-profit organizations that provide charitable services or to individuals with disabilities who have limited income.

Tax exemption also incentivises specific industries or investments deemed beneficial to the economy.

They can take many forms, including exemptions from income tax, corporate tax, sales tax, property tax, and import duties. The exemption terms may vary depending on the country or jurisdiction in question.

It is important to note that tax exemption differs from tax deductions or tax credits. Tax deductions reduce the amount of taxable income, while tax credits reduce the amount of tax owed. Tax exemption, conversely, completely exempts certain individuals or organizations from paying certain taxes.

To be eligible for tax exemption in Kenya, individuals or organisations must meet specific criteria set by the government.

They must apply for tax exemption with the relevant tax authority, and once approved, they will be issued a certificate of exemption.

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