Concern as Treasury Proposes to Hike Excise Duty by 35% on Imported Ceramics

Pressure and concerns are mounting against the Treasury Ministry’s proposal to impose an excise duty of 35 per cent on imported key construction materials like ceramic sinks, toilets, tile, washbasins, baths, and urinals.

In the proposed amendments to the First Schedule to the Excise Duty Act, 2015, the Treasury proposes to impose excise duty, a move that has faced backlash from stakeholders in the construction sector.

Experts warn that should the excise duty be imposed the cost of construction will increase especially for new homeowners further impacting the economy which is currently in turmoil. Construction stakeholders are strongly opposed to the excise duty.

This proposal is part of the Tax Laws (Amendment) Bill 2024 which seeks to widen the tax base and increase government revenue by imposing excise duties on various goods.

The proposals have sparked fierce resistance from construction firms who are now seeking to express their dissatisfaction with the Parliament’s Finance Committee.

While welcoming the proposals that may spur the local manufacturing industry, Real Estate firms in the construction space companies are concerned that the existing manufacturing capacity in Kenya is not yet developed to meet the demand for these essential goods.

Stakeholders are further alarmed at the implementation of the proposals which they say, besides increasing the cost of construction, the 35 per cent duty will hasten the dissolution of many companies in the real estate sector. 

Industry representatives emphasize that such significant tax hikes pose a threat to the survival of the building and construction sector in Kenya.

While making their submissions to the Finance and Planning Committee, industry leaders indicated that the increased costs would make the cost of ceramics expensive to many consumers, resulting in a sharp decline in sales.

The Excise Duty Act, of 2015 was established to impose taxes on specific goods and services within Kenya. The act aims to regulate and control the consumption of certain products while generating revenue for the government.

The First Schedule lists items that are subject to excise duty, which includes a range of products from alcohol and tobacco to luxury goods like ceramics.

The imposition of excise duty on ceramic sinks and toilets will see importers shoulder higher costs due to the excise duty, which may lead them to pass these costs onto consumers thereby increasing the cost of construction.

Stakeholders including importers, consumers, and local manufacturers will need to navigate these changes carefully as they unfold.