KRA Loses Ksh 9.1 Billion in Fuel VAT to Cushion Kenyans from Rising Fuel Costs

Communication and positioning now shape senior leadership success, influencing visibility, trust, and opportunities beyond qualifications and experience.

The Kenya Revenue Authority (KRA) has lost Ksh 9.1 billion in tax revenue between the period of April 2026 and May 2026 as a result of the adjustment in the Value Added Tax (VAT) on fuel from a percentage of 16 per cent to a percentage of 8 per cent.

In a press release issued on June 4, 2026, KRA said the revenue sacrifice forms part of broader government interventions designed to cushion Kenyans from the impact of volatility in international energy markets.

Speaking before the Senate Standing Committee on Energy, KRA Commissioner for Customs and Border Control Dr. Lilian Nyawanda said the tax relief intervention was introduced to mitigate the impact of global fuel price fluctuations on consumers and businesses across the country.

VAT Relief Measures Cost Treasury Billions

Highlighting the financial implications of the intervention, KRA stated that it had forgone Ksh 9.1 billion in tax revenue between April and May 2026 following the reduction of Value Added Tax (VAT) on fuel from 16 per cent to 8 per cent as part of measures aimed at cushioning consumers from rising global fuel prices.

The tax authority noted that while the measure has reduced government revenue collections in the short term, it remains a critical component of efforts to stabilize fuel prices and support economic activity.

Fuel costs have a direct impact on transportation, manufacturing, agriculture and household spending, making government intervention necessary during periods of global market instability.

Dr. Nyawanda told senators that the authority’s role was to facilitate implementation of government policy while ensuring efficient customs administration and trade facilitation processes.

“KRA supports the petroleum supply chain through the expeditious processing of import documentation, timely assessment and collection of duties, VAT, levies and other statutory charges, as well as the prompt release of cargo at petroleum depots in Mombasa and across the country,” she said.

Also Read: How Kenyans Can Retrieve Lost KRA PIN Using a Mobile Phone

Clarification on MT PALOMA Fuel Consignment

The Commissioner also addressed concerns surrounding the Premium Motor Spirit (PMS) consignment delivered by the vessel MT PALOMA, which is currently under investigation.

Dr. Nyawanda clarified that the consignment did not enter the Kenyan market and was instead redirected to other destinations.

“Addressing concerns regarding the Premium Motor Spirit (PMS) consignment delivered by the vessel MT PALOMA, which is currently under investigation, Dr. Nyawanda clarified that the consignment was re-shipped to other markets and did not enter the Kenyan market,” the statement said.

The clarification comes amid heightened scrutiny of petroleum imports and supply chain management in the country.

Also Read: Kenya Inflation Rises to 6.7% as Tomatoes, Fuel and Transport Costs Soar

Ksh 5.1 Billion Taxes to Be Transferred

KRA further disclosed that customs entries linked to the MT PALOMA consignment had since been cancelled and that taxes already paid would not be lost.

“She further explained that the related customs entries have since been cancelled and that taxes amounting to Ksh 5.1 billion, paid by various Oil Marketing Companies (OMCs) through the principal importer, MT PALOMA, are scheduled for transfer to customs declarations relating to subsequent fuel consignments,” the authority stated.

The transfer of the taxes is expected to ensure continuity in customs processing while maintaining compliance with existing tax regulations governing petroleum imports.

Dr. Nyawanda emphasized that KRA’s mandate within the petroleum supply chain remains limited to customs clearance, tax assessment, levy collection, transit control and trade facilitation functions as provided by law.

She added that the authority facilitates the importation and customs clearance of petroleum products upon approval by relevant Partner Government Agencies (PGAs), which are responsible for conducting quality assurance and compliance checks.

“KRA remains committed to facilitating legitimate trade, ensuring compliance with customs and tax laws, and supporting government interventions aimed at safeguarding the country’s economic interests while maintaining an efficient and secure petroleum supply chain,” the statement concluded.

Follow our WhatsApp channel for instant news updates