Economy
Fuel prices go up in Epra VAT revision
Friday, June 30, 2023
A worker fills a car at the Rubis petrol station in Nairobi. file image | NMG
The Energy and Petroleum Regulatory Authority (EPRA) has revised pumping prices upward in the wake of doubling the Value Added Tax (VAT) on petroleum products to 16%, in contravention of a court order Friday suspending the 2023 Finance Act.
Fuel prices will jump from midnight with petrol increasing by Sh13.49 a litre, diesel Sh12.39 and kerosene Sh11.96.
In Nairobi, a liter of supercharged petrol will sell for Sh195.53 while diesel will jump to Sh179.67 – the highest since Kenya began pricing at the pumps.
Epra released the new prices minutes after the Supreme Court suspended implementation of the law, days after President William Ruto approved them, paving the way for a doubling of value-added tax on fuel from 8.0 percent from July 1.
Higher prices will lead to a new round of inflation as commodity manufacturers, energy producers and service providers factor in increased fuel costs, ultimately hurting Kenyans already suffering from tough economic times.
“According to the Finance Act 2023, the value-added tax on super-petrol, diesel and kerosene has been revised from 8 percent to 16 percent effective from July 1, 2023. Accordingly, Epra has recalculated the maximum pump prices that will be in effect from 1 to July 14, 2023 taking into account value-added tax at 16 percent, the energy regulator said on Friday.
New fuel prices will increase the cost of electricity and increase the cost of more expensive agricultural goods, products and services.
Electricity bills will also go up because higher fuel prices will drive up fuel cost charges (FCCs) – the single biggest component of your electric bills.
The FCC is reviewed each month to reflect changes in fuel costs, which means the impact of the new diesel prices will be factored into your July electric bills.
Doubling the value-added tax deprives Kenyans of the benefits of the current decline in global prices for crude. The commodity is currently retailing at $73.02 a barrel, from a high of $87.88 in January.
The continued decline in global costs of crude oil would have given consumers a significant reprieve after the removal of fuel subsidies that were relieving Kenyans from April 2021.
The new VAT rates are expected to give the Kenya Revenue Authority (KRA) Sh128.98 billion annually from the current Sh64.5 billion. However, the combinations will be based on fuel consumption and global crude oil prices.
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