Budget: Relief for Kenyans as Treasury exempts bread from VAT

Some health products and technologies have also been exempted from VAT.

In Summary

• Yatani said bread will not attract VAT at the rate of 16 per cent from July 1, 2021.

• This is an answered prayer to the Bakers Association of Kenya (Bake) which had urged the government to reconsider plans to introduce 16 per cent VAT on ordinary white bread.

Breads displayed in a shop.
Breads displayed in a shop.
Image: CHARLENE MALWA

The National Treasury has exempted bread from the list of Value Added Tax  products in the 2021-2022 Budget.

Treasury CS Ukur Yatani said on Thursday while reading the budget that bread will not attract VAT at the rate of 16 per cent from July 1, 2021.

This is an answered prayer to the Bakers Association of Kenya (Bake) which had urged the government to reconsider plans to introduce 16 per cent VAT on ordinary white bread.

This comes as the majority of Kenyans who rely on bread say that the commodity is now retailing between Sh50-55 per 400gramme loaf.

In an appeal to Yatani last month, Bake told the National Treasury taxing the commodity will hurt the sector already struggling from the effects of the Covid-19 pandemic and high fuel price.

“The hike in fuel prices during the past few months has further eaten into the existing margins, reducing the profits we make. This new tax will further hurt the sector,” said Bake and the bakers’ sub-sector of the Kenya Association of Manufacturers in the appeal.

Health products and technologies have also been exempted from VAT in order to boost the health sector at this time of Covid-19.

"In order to strengthen our healthcare system, make the cost of medicines affordable for Kenyans, and step up the fight against the Covid-19 Pandemic, I propose to introduce VATexemption on medicaments used in our health facilities including decongestants and food supplements," Yatani said.

Further, the CS proposes to provide VAT exemption to diagnostic and laboratory reagents, artificial respirators including therapeutic respiration apparatus, breathing appliances, gas masks as well as medical equipment and technologies used in the provision of medical services.

Other products exempted from the tax include goods used in geothermal, oil, and mining projects, equipment for the generation of solar and wind energy, and assets transferred to Real Estate Investment Trusts and Asset-Backed Securities.

Also, the CS announced a transitional VAT exemption on goods used in power generation under power purchase agreements.

Yatani also announced the reintroduction of excise duty on betting at the rate of 20 per cent.

"The Finance Act 2020 removed excise duty on betting. The removal of this tax generated a lot of public debate considering that betting has become widespread in our society resulting in negative social effects."