TAX COMPLIANCE

Manufacturers face sanctions on bottled water,soft drinks

KRA is implementing the second phase of EGMS after a successful roll-out on alcoholic drinks and cigarettes in 2013.

In Summary

•Starting February 1, all products imported into Kenya or manufactured from November 13, 2019 must be affixed with an excise stamp.

•The taxman is targeting an additional Sh4billion in the second phase. The first phase increased excise tax from Sh700 million to Sh5.6 billion.

KRA officials display some bottled water confiscated during a past crack down on water companies which evade tax in Mombasa on march 13,2014./FILE
KRA officials display some bottled water confiscated during a past crack down on water companies which evade tax in Mombasa on march 13,2014./FILE

Kenya Revenue Authority plans to crackdown on packers and dealers in bottled water, juices, energy drinks, soda and other non-alcoholic drinks to enforce tax compliance.

The three-month window given to manufacturers, importers, distributors, retailers and general public to comply with the new Excisable Goods Management System(EGMS) regulations ends on Friday.

Starting February 1, all products imported into Kenya or manufactured from November 13, 2019 must be affixed with an excise duty stamp.

 

“Any persons found in the possession (of the products)manufactured or imported into Kenya on or after November 13, 2019 not bearing an excise stamp will lead to seizure of all listed products in their possession,” commissioner for domestic taxes Elizabeth Meyo said in a notice yesterday, “Offenders will be prosecuted.”

A section of manufacturers have been trying to manipulate their production lines to undercut the taxman, by backdating production dates of their commodities to before November 13.

“Some rogue players have been trying to backdate their products to continue selling goods without excise tax during the window period,” Water Bottlers Association of Kenya (WBAK)Chairman Henry Kabogo told the Star yesterday.

WBAK has called for full and strict implementation of the regulation on water , even as a section of manufacturers pleaded with KRA for an extension.

“We don't want any extension on bottled water. People have been punished even after producing before November 13. If it is complying let us all comply,” Kabogo said.

The Kenya Association of Manufacturers(KAM) has sought an extension, mainly on goods produced before November, which have a longer shelf life.

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,” KAM CEO Phyllis Wakiaga told the Star.

 

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

Industry players are required to take full account of products manufactured or imported into Kenya prior to November 13, 2019 that do not have excise stamps in their stores and submit these stocks to the nearest Tax Service Office by January 31.

KRA is implementing the second phase of EGMS after a successful roll-out on alcoholic drinks and cigarettes in 2013, which helped increase excise tax from Sh700 million to the current Sh5.6 billion.

The taxman is targeting an additional Sh4billion in the second phase.

The Consumers Federation of Kenya (Cofek) however remains opposed to taxation of these products.

“It is punitive and adds to the pain of cost of living. This taxes are some of the things that should be dropped if we are serious about addressing the plight of mwananchi,” secretary-general Stephen Mutoro told the Star on phone.