Tribunal orders KRA to refund firm Sh96.2 million

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 ordered KRA to process LPG's VAT refund claim within 90 days.

"KRA shall process the AGOL’s (KRA) VAT refund claim within ninety (90) days of the date of delivery of this judgement," said Justice Wafula.

The tribunal said that AGOL ="https://www.standardmedia.co.ke/business/article/2001498764/businessman-ordered-to-pay-kra-sh417-million-in-disputed-tax-case">fulfilled the requirements< of Section 17 of the VAT Act as far as support for input tax is concerned by supplying all the documents.

"The Tribunal therefore finds that the Respondent’s (KRA) claims that the Appellant (AGOL) neither provided documents as per Section 17 of the VAT Act nor supported its claims for excess VAT input tax to be unfounded, as the Appellant has provided the copies of these documents to the Tribunal and further demonstrated that it provided the same to the Respondent," said Justice Wafula.

On January 15, 2024, the firm applied for a refund of VAT amounting to Sh94,766,757 for May 2022 due to 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 said it exported goods to its customers in Uganda, Rwanda, and Ethiopia, which constituted zero-rated supplies of goods in the course of business 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.

On April 15, 2024, the KRA rejected the issuance of refunds, asserting that LPG was taxable at eight per cent during both periods.

AGOL said KRA failed to consider that they made zero-rated supplies in May 2022 and May 2023.

The gas suppliers said KRA violated Section 17(5) of the VAT Act (2013), which entitles a taxpayer to a refund of excess input tax arising from the making of zero-rated supplies.

AGOL stated that the zero-rated supplies were in its ="https://www.standardmedia.co.ke/health/national/article/2001500861/kra-wins-sh11b-tax-case-against-chinese-infrastructure-firm">refund application and invoices< related to the export of goods and their transportation to customers in East Africa.

In its defence, KRA said the LPG taxable rate was reduced from 16 per cent to eight per cent and not zero-rated as per the Finance Act of July 2022.

AGOL said that whereas KRA's position is correct in terms of local sales before June 30, 2022, where LPG was standard-rated, and between July 1, 2022, and June 30, 2023, where the rate had been reduced to eight per cent, KRA failed to consider that LPG made zero-rated supplies during the two periods, to wit, the exportation of taxable goods.