NEW LEVY

KRA's water, juices excise tax face hitches

Manufacturers have decried a high rejection rate of products and stamps by KRA printers.

In Summary

•SICPA, the Swiss company contracted to implement the stamp-fixing systems has been blamed for delays to fix any installation issue.

•Manufactures have until February 13 to clear the old stock and fully comply with the EGMS system, which the taxman is counting on to collect an additional Sh4 billion.

The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

Kenya Revenue Authority(KRA) risks missing its Sh4 billion additional excise tax target on bottled water, juices and non-alcoholic drinks as manufactures struggle to comply with the new levy requirements.

Manufactures yesterday said they are facing challenges in implementing the required provisions of the Excise Goods Management System (EGMS) which came into force on November 13.

The Kenya Association of Manufacturers(KAM) said though all manufacturers of soft beverages and bottled water under the association have complied, there is high rejection of products and stamps by KRA printers.

 
 

The(manufacturers) also continue to grapple with a low turnaround time for uploading stock-keeping units (SKUs) at KRA.

SICPA, the Swiss company contracted to implement the stamp-fixing systems has also been blamed for delays to fix any installation issue, resulting in a slow down in production and product damages after digital stamp activation.

This, KAM Chief Executive Phyllis Wakiaga said is leading to loses.

“Other challenges include additional staff required by manufacturers to manage the EGMS systems and cash flow constraints as the stamps are procured in advance,” Wakiaga told the Star yesterday.

Manufacturers have now warned that the three month window given in November last year, to clear old stock, is inadequate.

Most of these products, according to KAM, have a shelf life of more than one year and as a result, manufacturers produce them in bulk.

“Given that there is already existing stock in the market and the poor performance of the economy affecting consumer demand, the three months provided by KRA is not sufficient,” Wakiaga said.

 
 

KAM is however supportive of the new levy which it hopes will help fight counterfeits in the market and create a level playing field for producers of these products.

Manufactures have until February 13 to clear the old stock and fully comply with the EGMS system, which the taxman is counting on to boost revenue collection.

This is the second phase of the EGMS which comes after the successful implementation of the system on alcoholic drinks and cigarettes in 2013, which helped increase excise tax from Sh700 million to the current Sh5.6 billion.

“The development will enhance compliance, address illicit trade and boost revenue collection by approximately Sh4billion,”KRA commissioner for domestic taxes Elizabeth Meyo recently told journalists in Nairobi.

As of December 7, only 114 companies had complied , the Star had established, in a business area that has more than 400 companies.

This means more than 256 companies had not complied as entities went into the Christmas-New Year holiday break.

In a response to inquiries by the Star, KRA has placed the total number of activated stamps at 49.7 million, covering a total of 20.9 million litres of product.

Water companies accounted for more than 7.2 million stamps on 11.2 million litres of product.

Failure by companies to fully comply could deny KRA the much needed revenue to meet its targets which it has been missing, as pressure continues to mount from Treasury to supplement funding of the Sh3.02 trillion 2019/20 budget.

The taxman has been given a target of Sh1.87 trillion in the current financial year ending June 30, 2020, with up to Sh242.2 billion expected to come from excise tax.

This is up from the Sh1. 61 trillion target for the year 2018/19, which KRA missed after collecting Sh1.58 trillion.

Last week, the taxman introduced Turnover Tax for businesses with an annual revenue of below Sh5 million at a rate of three per cent to be filed monthly, in what is seen as its continued efforts to increase its collections.