Gas Expenses Expected To Drop Nationwide After VAT Removal

Kenyans looking to trim their cooking gas expenses can finally exhale a sigh of relief after the government exempted cooking gas meters suppliers from paying the 16 percent Value Added Tax. This welcome change comes after the signing into law of the Statute Law (Miscellaneous Amendments) Bill, 2024.

Previously, gas meters that measure how much liquefied petroleum gas (LPG) you’re using while cooking, were subject to a 16% Value Added Tax (VAT). This meant a significant chunk of the meter’s price went straight to the government.

The amended VAT Act, 2013, however, has changed the game. Gas meters are now listed among VAT-exempt supplies. In simpler terms, meter sellers won’t be charging VAT on the meters themselves, and buyers won’t be able to reclaim any VAT they might have paid during purchase. This translates to a direct cost reduction for both sellers and buyers.

This is an effort by the government to push for clean energy access, especially for low-income households. By making gas meters cheaper, the government hopes to encourage a shift away from dirtier fuels like kerosene and firewood. These traditional cooking fuels not only pose health risks to users due to indoor air pollution, but also contribute to environmental degradation.

This move builds on the success of last year’s policy change, which saw the removal of VAT on cooking gas itself through the Finance Act, 2023. The previous measure resulted in a noticeable drop in gas prices, with the average cost of a 13-kilogram cylinder going down from Sh3,069 in June to Sh2,787 in July 2023.

However, recent global price hikes have unfortunately caused a resurgence in gas prices, with a 13-kilogram cylinder reaching Sh3,231 in March 2024.

Despite these price fluctuations, the Kenyan government remains committed to increasing LPG consumption per capita.

Currently, the average Kenyan consumes only 6.8 kg of LPG annually, down from 8 kg in 2022.

The LPG Growth Policy outlines a multi-pronged approach to achieve this goal. First, they’re looking to the future of housing developments.

The policy proposes making LPG reticulation infrastructure, essentially a network of pipes for LPG delivery, mandatory for approval of all new housing projects.

This includes those under the Affordable Housing Programme, ensuring wider access to clean cooking fuel.

Secondly, the government sees LPG as a potential game-changer in the transportation sector. The affordability of LPG compared to petrol and diesel has already seen a rise in motorists converting their vehicles to use this cleaner fuel source.

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Finally, the government is tackling clean energy access head-on with initiatives like distributing subsidized gas cylinders to low-income households. They plan to distribute a total of 200,000 cylinders by July 2025. Additionally, they aim to convert 300 public learning institutions to clean cooking gas by the end of 2024.

President William Ruto has further pledged to distribute a total of 500,000 subsidized LPG cylinders to low-income households by 2028. By 2028, the government hopes to see LPG consumption rise to 15kg per person annually, with 70% of households using this clean and efficient cooking fuel.

 

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