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How Calculation Error Caused Fuel Prices Surge

Sofia KE

Aug. 03, 2020

Andrew Kamau, Petroleum PS, revealed that the fuel prices hike for the July 15th to August 14th period was a calculation error.
“There was a miscalculation by EPRA when they had not included excise duty in computing the VAT and that had to be corrected in the latest pricing review. This has now been corrected and since it was not the oil marketers’ mistake, there was no way to go back and ask them for what they didn’t collect,” he said.
The Energy and Petroleum Regulatory Authority (EPRA), announced new fuel prices on July 15th. Petrol prices rose by Ksh11.38 to retail at Ksh100.48 per litre in Nairobi while a litre of diesel increased by Ksh17.3 to sell at Ksh91.87. this was a he spike compared to the previous readings.
According to EPRA, oil marketing companies are to blame for the error as they misunderstood the taxation law.
"Price has been maintained but adjusted for the under-recovery of value-added tax by oil marketing companies that occurred in the previous pricing cycle," EPRA said in a statement.
 Pavel Oimeke, director-general EPRA, said that the companies did not adhere to Sections 13 and 14 of the VAT Act, 2013. According to him, the marketers had reportedly included only the excise duty as part of the taxable value rather than all taxes, levies, duties and fees in line with Section 13(3)(c) of the VAT, 2013, and the Tax Laws (Amendment) Act, 2020.
“The compensation to oil marketing companies for under-recovered value added tax was due to the understatement of the taxable value in the pump prices. The error resulted from misunderstanding of Sections 13 and 14 of the VAT Act, 2013 by a section of oil marketing companies and when this matter was brought to the attention of EPRA and on verification of the affected entries, it was confirmed that only excise was being included as part of the vatable amount,” Mr Oimeke said.
KRA said it wrote to EPRA, questioning on the VAT calculations. KRA says the law specifies that VAT computation for super petrol, diesel and kerosene at import point differs from the one at the sales point.
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