Local manufacturers win big in Yatani’s 2022/23 budget

NAIROBI, Kenya April 8-Local manufacturers are among the biggest winners in Yatani’s 2022/23 budget, getting a number of exemptions from tax as the country seeks to reap more from the sector.

The manufacturing sector, which is one of the pillars in Uhuru’s big four agenda, is among the largest and most competitive sectors in the country but also faces numerous taxation measures.

Yatani in his budget speech on Thursday directed the government to exempt inputs and raw materials used in the manufacture of passenger motor vehicles from (Value Added Tax)VAT

He also exempted locally manufactured passenger motor vehicles from VAT.

“These measures are meant to promote our manufacturing sector and enhance our exports by making inputs and raw materials used in the manufacture of goods more affordable, hence lowering the cost of production,” said Yatani.

Yatani also noted that some of the measures are aimed at enhancing the competitiveness of locally manufactured goods through protection from unfair competition by imported goods.

For instance, VAT on plant and machinery for use by manufacturers of pharmaceutical products will be exempted.

Further, Yatani noted that neutral spirit is an input for the manufacture of pharmaceutical products and the manufacturers of these products, which are not subject to excise duty, are entitled to a refund of the excise duty paid on the raw materials or inputs.

Even so, he noted that the processing of the refunds takes time, hence creating cash flow challenges.

“To address this concern, I propose to exempt neutral spirit used by registered pharmaceutical manufacturers upon approval by the Commissioner-General of KRA from excise duty,” said the CS.

Finally, the CS also proposed to exempt from excise duty locally manufactured passenger motor vehicles.

“This is aimed at encouraging investment in this sector and enhancing competitiveness of locally manufactured passenger motor vehicles,” Yatani said.

The manufacturing sector’s contribution to Kenya’s gross domestic product (GDP) stood at 7.6 percent in 2020 down from 7.9 per in 2019.

The dip coincided with a plunge in local factory activity  during the period as the coronavirus pandemic disrupted local and global supply chains.