Bottled water prices to increase by up to Sh130 on tax adjustment

KRA is set to rollout new excise based on inflation rate.

In Summary

•Other products to be affected includes beer, wines, cigarretes, non-alcoholic drinks such as juices, chocolate and fuel products.

•According to the Water Bottlers Association of Kenya (WBAK), the move will push up prices of bottled water and refilling by between Sh5 and Sh130.

The bottled water/FILE
The bottled water/FILE

Water bottlers have now asked the taxman to shelve inflation adjustment on excise duty to cushion consumers, and the industry which has taken a dip on sales in recent months.

This is ahead of the October 1, rollout which will see Kenya Revenue Authority (KRA) revise upwards excise on specific goods which will push up prices.

According to KRA, the specific rates will be adjusted using the average inflation rate for the financial year 2021/2022 of 6.3 percent, as determined by the Kenya National Bureau of Statistics.

"The Commissioner General will adjust the specific rates of taxes applicable to excisable goods, which are charged excise duty at a specific rate per unit under the Excise Duty Act, 2015, and other goods subject to fees or levies at a specific rate under the Miscellaneous Fees and Levies Act, 2016," Commissioner General Githii Mburu said.

This will see prices of products such as beer, wines, cigarretes, non-alcoholic drinks such as juices, chocolate, fuel products, bottled water, among others go up.

According to the Water Bottlers Association of Kenya (WBAK), the move will push up prices of bottled water and refilling by between Sh5 and Sh130, depending on product type and volume.

Ex-factory prices for 500ml water will increase to between Sh480 and Sh600, from Sh420, which will also come with excise on bottles.

A half litre of bottled water will retail at Sh40 from Sh30 with a litre set to increase to Sh80 from Sh70.

That of 20 litres will go up to Sh700 from the current prices of between Sh570 and Sh650.

This is an increase of up to Sh130.

Refilling a similar container will cost Sh430 up from Sh360.

This means consumers will have to dig deeper into their pockets to access the products, a time when city residents and parts of the country are struggling to access clean water.

The country is also experiencing a drought with parts of Northern region remaining with little or no access.

Inflation adjustment on excise duty to bottled water and similarly packaged will increase from Sh6.03 per litre to Sh6.41, which WBAK bottlers will have no choice but pass the extra costs to consumers.

“This effectively makes bottled water expensive and unaffordable to many. Most Kenyans now depend on bottled water unlike in the past when our natural sources were still intact from the effects of pollution,” WBAK chairman Henry Kabogo says in a memorandum to the taxman.

The association has also raised concerns over harassment of water refilling shops in the estates, which are allegedly being closed down by KRA enforcement officers who want them to comply as manufacturers or bottlers.

These shops sell Jerican at between Sh60 and Sh200 for a 20 litre as opposed to the Sh600 to Sh650 products available at the shelves.

“There is no way all Kenyans will be made to consume all their water from factories,” Kabogo argues.

He said the players cannot be subjected to manufacturing terms where at least Sh550,000 is required for compliance alone.

WBAK is the national wide, industry-specific trade association that represents and promotes the interests of water bottling , refilling , vending companies with government agencies and key industry stakeholders in Kenya.

It has over 350 members and represents over 60 per cent of the water industry players.

Close to 56 per cent of Kenyans rely on underground water mainly supplied from wells, boreholes, according to the Kenya National Bureau of Statistics.

Majority of the major residential estates and satellite towns around the city do not have clean water connection and rely on water sourced from private boreholes.

Examples of these estates which are considered to be the bedroom for Nairobi working force include Ngong, Ongata Rongai, Kiserian, Kitengela, Athi River, Syokimau and Ruaka.

Areas that have municipal or city water connection like Langata, South C, South B, Dagoreti, Westlands, Lavington etc, have inconsistent and unreliable supply, thus necessitating the need for borehole water connection.

Meanwhile, Stop Crime Kenya (StoCK), which has a secretariat at the Consumers Federation of Kenya (Cofek) has warned that the imminent inflation adjustment will lead to increased illict trade.

It also spells doom for struggling consumers, as it will lead to commodity price increases.

StoCK chairman Stephen Mutoro said: “This tax increase could not come at a worse time for consumers who are already battling the soaring cost of living.”

The inflation adjustment comes barely two months after price hikes in July, which came with the Finance Act 2022.

“These new increases will simply drive more shoppers to seek supposed bargains in the shadow economy, thereby boosting the profits of criminals involved in illicit trade,” Mutoro, who is also the Cofek Secretary General, said.

Households in the country have been battling a rising cost of living since June, with inflation hitting a five-year high of 8.5 per cent last month.

This was largely driven by the cost of food and non-alcoholic drinks.

“While taxation is necessary for economic prosperity, over taxation of a basic commodity like water in our country where access to clean safe drinking water by homes has not been realised, makes clean, safe drinking water unaffordable and inaccessible to many,” Kabogo said.

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