Law Society of Kenya has raised concerns over public participation hence KRA has been blocked from implementing the new regulations on excise duty.
The Kenya Revenue Authority (KRA) has faced a setback as the High Court blocked the implementation of new regulations on excise duty, which would have resulted in higher prices for beverages, bottled water, and cosmetics.
Justice Hedwig Ong’udi granted an injunction against Regulation 5 of the Excise Duty Amendment Regulations of 2023, following a challenge by the Law Society of Kenya (LSK). The LSK argued that the statutes were formulated without conducting proper public participation, as required by law.
The LSK expressed concerns that the proposed levies would lead to a substantial increase in prices, posing a threat to the survival of manufacturers of consumable products. The regulations sought to raise the fees for excise stamps on bottled water, non-alcoholic beverages, cosmetics, alcoholic beverages, tobacco and nicotine products, and export goods.
“The exercise of this mandate contrary to the law not only prejudices the petitioner but the public at large. In this matter, I am persuaded that the public interest outweighs the respondent’s mandate and tilts in favour of the petitioner. Therefore, putting the above in mind, I am satisfied that the principles of granting conservatory orders sought in this matter have been satisfied as will aid in meeting the ends of justice,” Justice Ong’udi said.
In March, the court dismissed the same case, ruling that the LSK had filed the petition prematurely as the regulations were still under debate and had not been enacted.
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KRA argued that the application and petition were premature since the draft regulations were still undergoing the legislative process, including public participation as stipulated by Article 10 of the Constitution. The KRA contended that no changes had been made to the content of the regulations, as they were identical to the draft that had been previously challenged.
The LSK emphasized the delicacy of the power to tax, stating, “The regulations are improper as they seek to adjust the price of excise stamps applicable to excisable goods, whose implementation threatens the survival of manufacturing businesses engaged in the sale and distribution of consumables, as well as other innocent third parties,” said Florence Muturi, CEO of LSK.
The proposed adjustment would have raised the price of excise stamps for various products such as prices of wines, bottled water, cosmetics, and electronic gadgets, only to mention a few.
LSK argued there was no justification for increasing the price of excise stamps and highlighted the intended purpose of these stamps in deterring counterfeiting, facilitating tracking along the supply chain, and enabling accounting for the production of excisable goods.
The court’s decision to stop the implementation of the excise duty increase will provide an opportunity for further examination of the regulations and ensure that proper public participation takes place, addressing the concerns raised by the LSK.
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