The Kenya Revenue Authority (KRA) faced another setback in its attempt to tax plastic bottles used for packaging non-alcoholic beverages.
The Tax Appeal Tribunal (TAT) ruled that the levies paid on the tubes used to manufacture these bottles should be refunded.
In resolving a dispute between KRA and Kenafric Industries, the tribunal, chaired by Judge Robert Mutuma, determined that the packaging bottles imported by Kenafric were raw materials.
The Ksh10.3 billion in excise duty paid for these bottles should be offset against the total tax payable on the final product.
The tribunal criticized the Commissioner of Domestic Taxes for disallowing Kenafric’s claim of excise duty for the imported preforms.
According to TAT, “The respondent erred in disallowing the appellant’s claim of excise duty in respect of imported preforms for making plastic bottles products under Section 14 of the Excise Duty Act.”
This decision benefits non-alcoholic beverage manufacturers who had opposed the removal of tax provisions in the Finance Bill 2024.
Beverage makers like Coca-Cola and East African Breweries Limited had argued that eliminating Section 14 of the Excise Duty Act would increase their production costs.
The Finance Bill 2024 aimed to eliminate this section, which allows for claims on excise duty paid for raw materials.
Also Read: CS Mbadi Reveals Sections of Finance Bill 2024 to Return in New Tax Proposals
KRA Argument & TAT’s Ruling
KRA had contended that since the raw materials are part of the final product, they should be considered finished goods.
However, the tribunal supported Kenafric’s argument that beverages cannot be sold without packaging.
The tribunal emphasized that Section 12 of the Excise Duty Act includes bottled or similarly packaged waters and other non-alcoholic beverages as excisable goods, which must be sold with their packaging.
Also Read: Treasury Erroneously Sends Ksh288 M for World Bank Funded Project
“This position is supported by the provisions of Section 12 of the Excise Duty Act which specifies bottled or similarly packaged waters and other non-alcoholic beverages, not including fruit or vegetable juice as a class of excisable goods that cannot be sold in their state other than accompanied by a type of packaging, in the appellant’s case being bottles,” the tribunal said.
The beverage manufacturers argued that paying excise on the inputs and the final product would amount to double taxation.
Kenafric stated that it paid Ksh10 in excise duty for each preform from September 2021 to June 2022 and wanted to offset this amount with the final excise duty due on bottled water and beverages.
Follow our WhatsApp Channel for real-time news updates:
https://whatsapp.com/channel/0029VaB3k54HltYFiQ1f2i2C
