The 16 per cent VAT on fuel will raise September inflation by one to two per cent, Treasury has said.
Speaking while appearing before the Senate Energy Committee, Chief Administration Secretary Nelson Ngaruiya said while the government acknowledge the toll the new tax has on Kenyans, it has an obligation to collect Sh35 billion from the tax every month to seal a budget deficit.
He, however, said that Treasury is in consultation with Parliament and other relevant players to find an alternative, which includes slashing development budget.
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Ngaruiya warned that such a move will have a negative effect on the economy and dent fiscal policy.
Both Treasury and ERC said that they are yet to receive any court order shelving application of VAT.
A Bungoma court had temporarily stopped implementation of the tax on fuel products.
The committee asked Treasury to act quickly and come up with alternative plans to raise Sh35 billion to save Kenyans the current burden.
Senator Ledama Ole Kina proposes that tax on cigarettes, alcohol and other luxury products be hiked to raise the deficit.
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