Households will from July 1 pay at least Sh300 more for cooking gas following the introduction of the 14 percent value-added tax on liquefied petroleum gas (LPG).
This is line with the Finance Bill 2020 that has now removed LPG from tax-exempt goods with the new value-added tax (VAT) charge in what is set to push it out of the reach of most households struggling with depressed incomes.
Currently, the 13-kilogramme cooking gas retails at between Sh2,100 and Sh2,200, meaning that it would now increase to between 2,400 and Sh2,508 from next month when the new tax measures come into force.
Treasury Cabinet Secretary Ukur Yatani said the Finance Bill is expected to become law by end of this month after Parliament changed the Act requiring earlier approval of the Finance Bill to avoid delays that have in the past hurt revenue collection targets.
“Contents of Finance Bill are expected to be law by July. This means new taxes will take effect when the new financial year starts,” said Mr Yatani.
Kenyan households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on LPG to cut costs and boost uptake among the poor who rely on dirty kerosene and charcoal for cooking.
The 14 percent VAT cuts short the anticipated fall in cooking gas costs following the fall in global prices of crude oil due to the coronavirus pandemic.
The LPG prices are not controlled, unlike other petroleum products and the new tax fuels fears that dealers could exploit the market forces to their advantage even as international crude prices continue to fall.
Cooking gas prices were expected to decline in line with the price of crude oil, which fell to a two-decade low, while demand was set to rise slightly as more Kenyans stay at home due to State restrictions to curb the spread of the Covid-19.
The rise in the cost of cooking gas is expected to pile pressure on families that are struggling to foot daily bills due to job losses and drastic cuts in earnings in the wake of the coronavirus pandemic.
Cooking gas prices for the 13-kilogramme fell to lows of Sh2,000 in October 2016 after the Treasury scrapped the 16 percent VAT.