TAX CHALLENGES

Bottlers rush to clear stocks as stamp tax window period ends

KAM wants deadline for stamp duty tax extended for clearance of old stock

In Summary

•The taxman has given licensed manufacturers, importers, distributors, retailers and general public until February 29, to clear stocks manufactured or imported into the country prior to November 13.

•KRA expects to collect an additional Sh4billion from the Excise Goods Management System (EGMS).

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

Dealers in bottled water, juices and energy drinks are rushing to clear old stock as Kenya Revenue Authority(KRA) as the February 29 deadline for unstamped products approaches.

The rush comes as the Kenya Association of Manufacturers,(KAM) seeks a three month extension for compliance.

The Excisable Goods Management System(EGMS) rule requires bottled water, juices, energy drinks, soda and other non-alcoholic beverages, manufactured in or imported to Kenya from November 13, 2019, be affixed with an excise duty stamp.

Licensed manufacturers, importers, distributors, retailers and the general public have until February 29, to clear stocks manufactured or imported into the country prior to November 13.

“Any remaining stocks as at February 29, 2020 shall be affixed with excise stamps for the products to be allowed in the market,” commissioner for domestic taxes Elizabeth Meyo said.

KRA first gave a notice on EGMS compliance on these products on October 28, 2019 and further by a public notice dated January 28, 2020.

“The public are notified that any products found in the market after February 29 , 2020 not bearing an excise stamp shall be seized and offenders prosecuted,” Meyo said in a statement on February 14.

Yesterday, KAM said most of the products 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 their warehouses and in the supply chain, and the poor performance of the economy affecting consumer demand, the period provided by KRA is not sufficient,” KAM CEO Phyllis Wakiaga said.

KAM said non-alcoholic beverages are demand elastic and due to the prolonged rainy season which stretched from October to January, there was low demand which coincided with the notice period by KRA.

 

“The Association has requested for the extension of the deadline period to May 31, 2020. This will ensure that manufacturers completely exhaust what is in their warehouses and along the value chain,” KAM said.

Lack of stamps and complications in getting KRA clearance and compliance certificates is also posing a challenge.

“For the last three weeks there has been no stamps. We are ready to comply but the government must make it easy for us,” said Erick Mogaka, director at Kisii based-Riverdrops Pure Drinking Water Limited.

Manufacturers are also grappling with huge market returns as a result of invisible stamps.

“The ink used by the service provider to print digital stamps on the soft beverages and bottled water is of a dark colour. This poses a challenge to manufacturers who have dark coloured caps as the digital stamp is not visible,” Wakiaga said.

The lobby group has proposed that the service provider provides a range of digital stamps ink colours to cater for both dark and bright coloured caps.

Meanwhile, Water Bottlers Association of Kenya (WBAK) has warned that some manufacturers have been backdating their production lines to sale new stock without stamps.

“These people have been undercutting the systems and selling their products at cheaper prices. This has disadvantaged compliant players,” WBAK Chairman Henry Kabogo told the Star