New water and beverages tax set for September

The Kenya Revenue Authority (KRA) is set to start implementing the controversial Excisable Goods Management System (EGMS) from September 1.

Through the system, the taxman is looking to raise more than Sh3.6 billion from manufacturers of bottled water, non-alcoholic drinks and cosmetics.

KRA has now called on manufacturers and members of the public to give feedback on EGMS, with the taxman saying almost all the automated water and juice manufacturers have installed the new system.

"KRA has concluded installation of the EGMS in 42 out of the 46 automated water and juice production lines. Alternative arrangements have been provided for manufacturers with manual production lines,” said KRA in a statement. The EGMS will see security excise stamps with track and trace features affixed to products at the point of manufacturing in a bid to fight tax evasion and illicit trade.

The roll-out of the new system was slated for August 1 last year, but a High Court ruling and a parliamentary audit delayed the process for another year.

Manufacturers had also warned the system would have a negative impact on the industry by raising operational costs, thus significantly increasing the cost of doing business in the country. "The costs attached to EGMS range from Sh0.50 to Sh2.80 per unit, which are high for all manufacturers and untenable for small industries, which will impact negatively the competitiveness of the industry,” said the Kenya Association of Manufacturers Chairman Sachen Gudka last week.

"Further, manufacturers do not have any control on possible increment on the excise stamp duty in future as experienced by some sectors such as tobacco manufacturers, whose duty was increased from Sh1.5 to Sh2.8 per unit."

Activist Okiya Omtata has since moved to the Supreme Court to challenge the system, citing irregularities in KRA’s procurement process.