Cost of solar energy set to reduce as State mulls VAT exemption
Cost of accessing solar energy is set to reduce with the expected zero-rating of solar equipment to address concerns that the government had intended to increase it.
Treasury’s Chief Administrative Secretary Nelson Gaichuhie told the Senate’s energy standing committee yesterday that a bill to exempt a value added tax (VAT) on solar materials and equipment will be tabled in the National Assembly next week.
“We are removing VAT on solar energy and even the components of solar energy...however, as the National Treasury only proposes the Finance Bill, the ultimate answer comes from Parliament,” said Gaichuhie.
The Bill if enacted will provide relief to low-income households in Kenya who will be able to afford solar-powered equipment, including the basic solar-powered lights.
It will also hasten the switch by corporations with Bidco, Two Rivers Mall, Oil major Total already on solar, and saving as much as 50 per cent of their energy cost, thereby posing competition to the state utility power distributor, Kenya Power.
The Finance Act 2020 amended the first schedule to VAT by deleting paragraph 45, which provided for the exemption of specialised equipment for the development and generation of solar in a move Gaichuhie said was to reduce tax expenditure.
Gaichuhie said Kenya’s tax expenditure to gross domestic product (GDP) by the year 2020 was at 6 per cent which was among the highest in Africa, and needed to be reduced to the standard 2 per cent.
Renewable energy
“Unfortunately solar energy was among the things that many things that were affected. But we are now reconsidering that since everyone wants to go to renewable energy, in this Financial Bill, this is one of the things that we want to return to tax-exempt.”
The tax exemption provided the use of clean energy and is an alternative to expensive environmental degrading diesel thermal energy or equally expensive hydro energy.
