TAXATION

No tax break on water, juices KRA warns

KRA postponed the implementation of EGMS for excise production

In Summary

• EGMS phase two roll out was meant to commence on September 1.

• Kenya Association of Manufacturers (KAM) has warned the system will increase the cost of business. 

Hawkers selling soft drinks during a past event in Kakamega High school. /FILE
Hawkers selling soft drinks during a past event in Kakamega High school. /FILE

Taxes on bottled water, juices, soda and any other non-alcoholic beverages as well as cosmetics have not been suspended,  Kenya Revenue Authority said yesterday.

It cautioned the public against media reports which indicated it has suspended taxes on the products.

In its Tuesday Edition, Business Daily reported that KRA has temporarily suspended taxes on the products, terming it a relief for both consumers and manufacturers who are grappling with high costs of doing business.

 

On July 30, KRA embarked on a countrywide public participation exercise targeting manufacturers of non-alcoholic drinks and the public on the implementation of the second Phase of Excisable Goods Management System (EGMS).

According to KRA, the exercise  was meant to gather views and receive feedback from key stakeholders on various issues regarding implementation of EGMS (Phase Two) prior to its roll out set for September 1.

“ The communication by KRA did not suspend any taxes on bottled water, juices, soda and any other non-alcoholic beverages as well as cosmetics as claimed,” KRA said  in a statement issued by Commissioner for Domestic Taxes Elizabeth Meyo.

She explained that taxes are imposed by law and become effective by way of statute adding that KRA has no mandate to defer implementation of the same.

"KRA postponed the implementation of EGMS which is a tool for accounting for excise production and traceability of excisable goods,” the authority said, “This is is not a tax."

It said the postponement was to enable manufacturers to complete installation of the system before a new go live date is communicated.

“Implementation of the EGMS system on production lines is ongoing at manufacturers’ premises and so far 91 per cent of automated lines have been installed,” Meyo said.

She said the remaining constitutes of new production lines previously not mapped.

Implementation of the EGMS comes after a recent review by the National Treasury which revised downwards excise stamps from Sh1.50 per stamp to Sh0.5 per stamp for water and Sh 0.6 for other non-alcoholic beverages and cosmetics.

The Kenya Association of Manufacturers(KAM) have warned the system will increase the cost of business.

"Whilst the EGMS seeks to combat illicit trade and authenticate excisable goods, the implementation of the System will have a negative impact on industry by raising operating costs and capital expenditures thereby significantly increasing the cost of doing business, which ends up raising the cost of living for Kenyans,''KAM chairman Sachen Gudka said.

The costs attached to EGMS range from Sh0.50 to Sh2.80 per unit, which according to KAM, they are high for all manufacturers and untenable for small industries.

''This will impact negatively on the competitiveness of industry,''Gudka said.

The system is aimed at sealing excise tax evasion loopholes and help the tax man collect more revenues.

The installation of the KRA EGMS equipment on the manufacturers’ production lines is done at no cost to the Industry. Any incidental costs may occur depending on the contractual and warranty requirements between manufacturers and their equipment suppliers.

KRA has concluded installation of the EGMS in 42 out of 46 automated water and juice production lines. Alternative arrangements have been provided for manufacturers with manual production lines.

EGMS is designed to have minimum impact to the efficiency of manufacturers’ production lines.  To this end, EGMS operates at speeds that are at least 2.5 times faster than the highest installed production speed in the country.