Kenyans are set to face hiked prices on various products including alcohol, juices, cosmetics and cigarettes.
This is after Justice Hedwig Ong'undi threw out an application by the Law Society of Kenya seeking to block the Kenya Revenue Authority's (KRA) intention to enforce the proposed regulations -Excise Duty (Excise Goods Management System) (Amendment) Regulations, 2023. The impact is to adjust and raise the price of excise stamps of the products.
While throwing out the case filed by LSK, Justice Ong'undi said that it was premature because the disputed regulations have not been enacted into law and are at the public participation stage.
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"This court notes that the public notice dated January 17, 2023, issued by KRA on the regulations were draft, hence the same are not yet finalized contrary to the petitioner's allegations," Justice Ong'undi stated.
The judge concurred with KRA submissions that the making of the regulations to increase the excise duty stamps is at the consultative stage. The National Assembly, Attorney-General and KRA are at liberty to conclude the enactment of the regulations.
LSK was apprehensive that the regulations were to take effect on March 1, 2023, and that Kenyans are at risk of purchasing the products at hiked prices.
But the court said that the effective date notwithstanding, the LSK is still at liberty to return to court once the regulations have been properly published.
The KRA’s proposed regulations seek to increase the fees of excise stamps for bottled water, juices and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products and export products subject to excise with effect from March 1, 2023.
The Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 proposes to raise the stamp fees for cosmetics from 60 cents per stamp to Sh2.50 — a margin of 317 percent — while the stamp fee for fruit juices and non-alcoholic beverages such as sodas will go up by 267 percent to Sh2.20 from 60 cents.
The cost of a stamp affixed on a beer bottle will double to Ksh3 from Ksh1.50, while those for spirits, wines and tobacco products are set for a 79 percent rise to Ksh5 from the current Ksh2.80 per stamp.
The higher stamp prices will likely be passed down to the final consumer by producers and importers, similar to other excise charges, adding to the recent 6.3 percent adjustment for inflation that came into effect last October and the usual rate revisions contained in the annual budget.
In its case LSK through its president, Eric Theuri told the court that Kenyans are at threat of purchasing products at hiked prices and flooding illicit goods in the market if KRA is allowed to implement the proposed regulations.
"No refund mechanism for consumers and manufacturers will lose share of the market to illicit products. Come March 1, the amendment will take effect and the petition will be rendered naught. Allow the prayers in the application," Theuri said.
In the application, LSK said the adjustment will increase the stamps of beer from Sh1.5 to Sh3 per stamp, wines including fortified ones and spirits exceeding 10 percent from Sh2.8 to Sh5.0 per stamp.
"The said regulations seek to adjust the price of excise stamps applicable to excisable goods by increasing the cost of these stamps, an implementation which threatens the survival of manufacturing businesses engaged in the sale and distribution of consumables as well as other innocent third parties. The increase is neither justified nor rational and only serves to increase the tax burden on manufacturers of excisable products and innocent taxpayers," LSK said.
It added that the rationale of issuing excise stamps "as can be gleaned from Regulation 6 of the 2017 Regulations is for purposes of tax administration as opposed to revenue collection which is covered by the imposition of excise duty on excisable goods and services".
"Therefore the Commissioner-General is arbitrarily imposing the excise stamp fees as a means of revenue collection contrary to the provisions of Article 201 (1) (b) of the Constitution," it added.
