Water refill vendors now sue taxman over excise duty

Times Tower building in Nairobi which hosts Kenya Revenue Authority offices. [Wilberforce Okwiri, Standard]

Water vendors have sued the Kenya Revenue Authority (KRA) in battle over excise duty levied on water refills.

The petitioners, led by Ms Faith Kamau and Ms Esther Kwamboka, argue that it is illegal for KRA to demand tax from vendors since refilling water is not a manufacturing process.

“Classifying water refilling as manufacturing subject to the imposition of excise duty under Section 5 of the Excise Duty Act is unlawful and contravenes the provisions of Article 201(b)(i) and 210 (1) of the Constitution; and as such null and void ab initio,” the vendors’ court papers filed before High Court judge James Makau read.

KRA issued a notice in 2020 to water re-fillers: “KRA wishes to remind all persons who are engaged in the business of bottling (including through refilling) or packaging water that they are required to obtain an excise licence from KRA and also charge and remit excise duty as required by the law.”

It said: “They are required to affix excise stamps on each bottle that has been refilled or packaged.”

At the heart of the dispute were home and office users who use dispensers and vendors who sell water using ATMs. In court, the vendors claim that KRA officials have carted away their machines and limited their right to earn a living.

Water Bottlers Association of Kenya had initially opposed the imposition of excise tax, arguing that its members were majorly small and medium enterprises. They wanted KRA to look into the model of refilling and accommodate it in the Excisable Goods Management System.

Justice Makau heard that the vendors were paying double tax, as they were required to apply for licences and excise stamps to run water refill shops.

The petitioners say it is impossible to pass taxes to consumers and make a profit if the demands by KRA are to be allowed. They want the court to bar KRA from demanding water re-fillers to obtain an excise licence to operate a water refill.

A consumer ought to pay at least Sh6.03 for a bottle of water. KRA’s targeted at least Sh3.6 billion from the water excise tax. According to the petitioners, they also pay taxes to get water from water processing companies. 

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