No VAT refunds yet despite Uhuru order - manufacturers

Government, counties and businesses owe in excess of Sh180 billion.

In Summary

•Pending bills owed by the national government are of approximately Sh56 billion. However, Sh43 billion is contested.

•There is another approximately Sh100 billion in withholding VAT, due by KRA appointed agents from payments made for local taxable supplies.

Treasury buildings.
Treasury buildings.
Image: FILE

Industries are struggling with low liquidity amid piling pending bills by the government, despite the National Treasury's commitment to release Sh23 billion a fort-night ago.

Cabinet Secretary Ukur Yatani had said disbursement of Sh13 billion owed in pending bills and a further Sh10 billion tax refunds were to commence on April 24.

However, businesses mainly manufacturers are yet to receive the payments according to the Kenya Association of Manufacturers(KAM), which now wants the government to expedite the process.

The government owes approximately Sh27 billion in VAT refunds on exports to manufacturers and exporters.

“We still have a liquidity problem. We are asking the government to release these funds,” KAM chairman Sachen Gudka said in a webinar on the economic impact of Covid-19.

According to KAM, the national government and counties owe manufacturers in excess of Sh180 billion.

There is another approximately Sh100 billion in withholding VAT, due by KRA appointed agents from payments made for local taxable supplies (goods and services).

The portion of VAT that is withheld is six per cent out of the 16 per cent chargeable VAT, currently reduced to 14 per cent over coronavirus effects on the economy.

Pending bills owed by the national government is approximately Sh56 billion. However, Sh43 billion is contested.

“The figure owed by county governments is unknown at the moment,” Gudka said.

Latest data shows Kenya Revenue Authority (KRA) rejected Sh6.1 billion VAT refund claims in the financial year to December 2019, after a scrutiny of applications.



During the half-year period (July-December) KRA paid VAT refund claims amounting to Sh9 billion.

Delays in refund have been partly caused by lodging of inaccurate claims by taxpayers (wrong declarations), according to KRA Commissioner for Domestic Taxes Department Elizabeth Meyo.

Lack of proper documentation has forced KRA to heighten scrutiny on claims to avoid wrong payments and curb possible fraud.

Currently, claims amounting to Sh1 billion cannot be processed because the refund claimants are yet to provide required documents,” the commissioner's office told the Star recently.

Other causes for delayed VAT refunds, according to KRA, is a high risk of cargo diversion.

The taxman has called for accountability by other agencies, noting the need for rigorous verification so that no case is perceived to be refunded when having debt or without export, verification owing to risks of export diversion.

The process is hurt by the need for debt validation and export verification and the inclusion of other time-consuming activities that are not part of the refund process.

Times Tower has also lamented low funding from Treasury. Currently, the National Treasury allocates Sh1.2 billion to pay VAT claims per month while the monthly claims average Sh2.5 billion. This, KRA says, creates a deficit that leads to the backlog.

To address the challenge, KRA has requested additional funding from the National Treasury,” the authority said in response to inquiries by the Star.

KRA has put in place appropriate measures including implementation of the green channel framework to fast track processing of low-risk claims and establishment of a full-time project team to process the backlog claims in the next three months, it said.