Government proposes three‑month extension of 8% VAT on fuel to December

Kenya’s cabinet is set to extend the reduced 8% VAT on petrol, diesel and kerosene for another 90 days, aiming to soften the impact of rising global oil prices on consumers.

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The State‑sponsored Tax Laws (Amendment) Bill, 2026 seeks to keep the value‑added tax on petroleum products at 8% for an additional 90 days, pushing the expiry date to mid‑December.

The current reduced rate is due to lapse today, coinciding with the government’s scheduled announcement of new pump prices for the pricing cycle ending 14 November.

If approved, the extension could cost the Treasury more than Sh36 billion in foregone VAT revenue, adding to the Sh9.1 billion already lost in April and May, which averages about Sh4.5 billion per month.

The bill is sponsored by Majority Leader Kimani Ichung’wah and is expected to be presented to Parliament alongside the new fuel price announcement.

Petrol currently sells at Sh214.03 per litre and diesel at Sh217.86 per litre, prices that have risen sharply after a $87 (Sh11,286.51) increase in petrol and a $57 (Sh7,394.61) rise in diesel during the first nine days of the previous month.

The move follows a surge in Brent crude, which has traded between $101.21 (Sh13,105.45) and $106.65 (Sh13,812.91) this month, driven by geopolitical tensions involving the United States, Israel and Iran.

Kenya’s reliance on imported refined petroleum makes domestic fuel prices highly sensitive to such international price swings.

The government’s capacity to subsidise fuel directly is dwindling; the Ministry of Energy and Petroleum reported in June that the subsidy fund, financed by the Petroleum Development Levy, was running low after a record Sh34.07 per litre diesel subsidy earlier in the year.