VAT On Fuel To Increase Pump Prices, Affect Transportation & Manufacturing

The Energy and Petroleum Regulatory Authority (EPRA) has announced that it will increase fuel prices on June 30, 2023, following the implementation of a 16% VAT on petroleum products.

The new VAT rate will inevitably lead to an increase in pump prices, which will have a ripple effect on transportation costs, affecting commuters, businesses, and the overall cost of goods and services.

The transportation sector, including public transportation and logistics companies, will face the immediate brunt of the fuel price hike. With higher fuel expenses, transport operators may be forced to increase fares to maintain profitability. This, in turn, can result in an added financial burden on commuters who rely on public transport for their daily commute.

Manufacturers will also feel the impact of the increased VAT on petroleum products. The rise in fuel prices will lead to higher operational costs, as transportation expenses for raw materials and finished goods will increase. This could lead to higher prices for consumers, as manufacturers pass on the increased costs to them.

The inclusion of a VAT on petroleum products is expected to have far-reaching consequences for Kenyans. The new tax will increase the cost of living for many people, and it could also have a negative impact on the economy.

Here are some of the key impacts of the VAT on fuel:

• Increased transportation costs: The rise in fuel prices will lead to higher transportation costs for businesses and individuals. This could make it more expensive to transport goods and people, which could have a negative impact on the economy.
• Higher prices for goods and services: The increased cost of transportation could lead to higher prices for goods and services. This is because businesses will need to pass on the increased costs to consumers.
• Reduced economic growth: The higher cost of living and doing business could lead to reduced economic growth. This is because businesses may be less likely to invest and hire new workers if their costs are rising.

The VAT on fuel is a significant policy change that will have a major impact on Kenyans. It is important to understand the potential impacts of this policy so that we can mitigate the negative effects and maximize the positive ones.