The National Assembly has approved the Excise Duty (Amendment) Bill, 2025, which seeks to remove excise tax on certain imported goods.
This decision marks a big shift in tax policy, especially for the energy sector, as it targets items like fully assembled electric transformers that had been previously taxed.
Transformers were first subjected to excise duty under the Tax Laws (Amendment) Act, 2024. The aim at the time was to promote the local assembly and manufacturing of transformers, which are essential in power distribution.
However, this plan did not work as intended. Instead of boosting local production, the 25 per cent tax led to higher costs for importing parts needed to assemble transformers.
As a result, transformer production was negatively affected, and local manufacturers faced increased financial pressure.
Now that the Excise Duty (Amendment) Bill has been passed by Parliament, it will be sent to the President for assent before it can officially become law.
If the President signs it, companies that operate in the electricity sector will benefit greatly, as the cost of importing key equipment like transformers is expected to go down.
This could also encourage more investment in the energy sector, as lower operational costs may help companies install and supply more transformers across the country.
The government had also previously imposed excise duty on a range of other imported products under the 2024 tax law changes.
These included imported printing ink (except from East African Community (EAC) partner states that meet the EAC Rules of Origin), ceramic sanitary products which were taxed at 5 per cent, polished glass which attracted a 35 per cent duty on its customs value, and coal which was taxed at 2.5 per cent.
Additionally, some types of polymers such as saturated polyester, vinyl acetate polymers, and styrene acrylic emulsions were hit with a 20 per cent tax based on their customs value.
These taxes had raised concerns among manufacturers who rely on these materials for their production processes.
With the new amendment bill expected to become law soon, companies in the energy industry are seen as the main winners.
The removal of taxes on transformers will make it cheaper and faster to import essential power components.
This could lead to faster electricity connections, especially in rural areas where transformer shortages have slowed down power access.
A statement from the official Parliament of Kenya website confirmed these expectations. It said, “If enacted, this amendment is expected to lower electricity costs and improve power connectivity by facilitating increased manufacturing and supply of transformers to the Kenya Power and Lighting Company.”
The timing of this new bill is particularly important. Kenya Power, which is the main distributor of electricity in the country, has recently been struggling with a shortage of transformers.
This has delayed new power connections for thousands of homes and businesses.
In April 2025, Kenya Power launched an emergency plan to purchase 3,319 transformers within just two weeks. The removal of excise duty will now help make such urgent procurement efforts more affordable and efficient.
In summary, the Excise Duty (Amendment) Bill, 2025, is expected to ease the burden on the energy sector, lower costs, and improve electricity access across Kenya.
If it becomes law, it could play a key role in solving current challenges and speeding up the country’s power connectivity goals.
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