KRA Headquarters, Times Towers, Nairobi. Photo | courtesy.
Africa Gas and Oil Company Limited (AGOL) has won a Sh96.1 million tax refund case against the Kenya Revenue Authority (KRA)
The tax tribunal dismissed KRA’s VAT demand of Sh96,181,775 from the firm based in Mombasa.
Justices Nyongesa Wafula, Cynthia Mayaka, Gloria Ogaga, Rodney Oluoch and Abraham Kiprotich directed KRA to process AGOL’s VAT refund claim within 90 days.
Justice Wafula stated that KRA must process AGOL’s VAT refund claim within ninety (90) days from the date of judgment delivery.
The tribunal determined that AGOL had met the requirements of Section 17 of the VAT Act by providing all necessary documents to support its input tax claims.
“The Tribunal finds that KRA’s assertion that AGOL failed to provide the required documents under Section 17 of the VAT Act is unfounded. The appellant has submitted these documents to the Tribunal and demonstrated that they were also provided to the respondent,” said Justice Wafula.
AGOL had applied for a VAT refund of Sh94,766,757 on January 15, 2024, for May 2022, citing excess input tax resulting from zero-rated supplies.
A month later, on February 12, 2024, the gas suppliers made a further application for a refund of VAT amounting to sh1.4m for May 2023, which was similarly excess input tax arising from zero-rated supplies.
AGOL stated that it exported goods to customers in Uganda, Rwanda and Ethiopia, qualifying as zero-rated supplies under Paragraph 1 of Part A of the Second Schedule to the VAT Act (2013).
The gas supplier stated that it is clear from the VAT 2023 that the exportation of goods is zero-rated.
AGOL said there was excess input tax for the two periods, which is from their VAT returns.
However, on April 15, 2024, KRA denied the refund requests, arguing that LPG was subject to 8 per cent tax during both periods.
AGOL contended that in May 2022 and May 2023, KRA failed to acknowledge their zero-rated supplies .
The gas supplier further accused KRA of violating Section 17(5) of the VAT Act (2013), which grants taxpayers the right to a refund of excess input tax resulting from zero-rated supplies.
AGOL stated that the zero-rated supplies were in its refund application and invoices related to the export of goods and their transportation to customers in East Africa.
In its defence, KRA argued that, the LPG taxable rate was reduced from 16 per cent to 8 per cent and not zero-rated as per the Finance Act of July 2022.
AGOL acknowledged that KRA’s position was accurate regarding local sales where LPG was standard-rated before June 30, 2022 and taxed at 8 per cent between July 1, 2022 and June 30, 2023. However, the company maintained that KRA failed to recognize that it made zero-rated supplies during these periods through the exportation of taxable goods.
