Value Added Tax (VAT) on fuel (diesel and petrol) will be halved (reduced from 8% to 4%) if Parliament adopts proposed changes to the law seeking to lower pump prices.
Further, the National Assembly committee on Finance and National Planning says fuel should also be exempted from the annual review of inflation tax. Proposed changes to the law will exempt petrol, diesel and kerosene from the excisable goods under Excise Duty Act of 2015.
The proposals contained in the Petroleum Products’ (Taxes and Levies) (Amendment) Bill, 2021 will also slash the levy that motorists pay to support a fuel subsidy scheme from KSh5.40 per litre to kSh2.90.
VAT accounts for KSh9.98 for every litre of super petrol and KSh8.56 per litre of diesel, the second biggest tax item on fuel after excise duty and road maintenance.