tax on water and other drinks www.businesstoday.co.ke
Key stakeholders convened on Thursday, 23rd February, to discuss EGMS stamp affixing deadline. [ Photo / business today ]

The cost of bottled water and other soft drinks is set to go up from 1st February 2020 as a new excise duty comes into force.

All is set for the Kenya Revenue Authority (KRA) Excisable Goods Management System (EGMS) on bottled water, juices, soda, and other non-alcoholic beverages and cosmetics sector to finally go live on 1st February after delays to clear implementation bottlenecks.

Some stakeholders have, however, expressed reservation on the execution, fearing it may cause hiccups for businesses.

What the new tax means

The Water Bottlers Association of Kenya (WBAK) says KRA has not conducted adequate awareness and many businesses are likely not to comply before the deadline. It adds that there has been little effort to educate consumers on the impact of excise tax on products.

From 1st February 2020, all bottled water and affected non-alcoholic drinks should have stamps regardless of their dates of manufacture. Any bottled water that has no stamp will be considered contraband.

“We are calling on all wholesalers, retailers, supermarkets, bars, hotels and restaurants to exercise caution and hold reservations towards bottled water that has no stamps,” Mr Henry Kabogo, Chairperson of the Water Bottlers Association of Kenya, said on Thursday.

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EGMS seeks to combat illicit trade and authenticate excisable goods but manufacturers say it will have a negative impact by raising operating costs and capital expenditures, thereby significantly increasing the cost of doing business and for the end-users.

The costs attached to EGMS range from Ksh0.50 to Ksh2.80 per unit. Any manufacturer selling water without stamps risks the danger of being convicted for tax evasion and their licenses revoked.

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“While we support the efforts by KRA to provide a level playing ground for all legitimate businesses, we also sympathize with the ordinary people who are forced to take up the burden of excise and other taxes.”

Mr Kabogo said WBAK supports President Uhuru Kenyatta’s efforts to reduce the cost of living for Kenyans. “We, therefore, request the President to make things right by lowering the sin tax imposed on water,” he said. “We have done our best to agitate for the interest of the common person and we will not relent until this is realized.”

Low water excise duty

Mr Kabogo said the EGMS system would bring fairness in business competition, but they will continue to push for a reduction of the excise charged against bottled water. “We would be burying our heads in the sand if we continued to consider bottled water to be a luxury product in the same category as cigarettes and alcohol,” he said.

He said they have petitioned different government institutions to consider scrapping or at least reducing the amount of excise charged against basic bottled water.

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