Ichung’wah’s Bill Extends Fuel Tax Relief as Pump Prices Soar

Kenyan motorists and households are set to continue receiving tax relief on fuel after the National Assembly passed key legislation to maintain the reduced Value Added Tax (VAT) on petroleum products at 8 percent for an additional three months.

The decision comes as a direct response to a sharp surge in domestic pump prices. The Tax Laws (Amendment) Bill, 2026, sponsored by Majority Leader Kimani Ichung’wah, prevents the tax rate on petrol, diesel, and kerosene from reverting to the standard 16 percent VAT rate.

This legislative push offers crucial intervention following the Energy and Petroleum Regulatory Authority’s (EPRA) latest monthly price review. In its October-November cycle, EPRA increased pump prices by Ksh12.93 per litre for super petrol, Ksh9.90 for diesel, and Ksh28.49 for kerosene.

The new pricing structure sets retail costs in Nairobi at Ksh226.96 per litre for super petrol, Ksh227.76 for diesel, and Ksh219.87 for kerosene. In Mombasa, consumers now pay Ksh223.81 for petrol, Ksh224.61 for diesel, and Ksh216.71 for kerosene.

Legislative Action and Geopolitical Pressures

While introducing the Bill on Wednesday, October 14, 2026, Ichung’wah explained that the temporary extension provides an immediate 90-day cushion for consumers. He noted that the provision empowers the Cabinet Secretary for the National Treasury to grant another three-month extension if geopolitical instability in the Middle East continues.

“We need to amend the VAT Act to extend the reduced rate for another 90 days, in the hope that the war in the Middle East will come to an end,” Ichung’wah said, adding that the proposed provision would allow the relief to continue for up to six months.

The steep jump in pump prices stems from mounting international oil market pressures linked to the conflict involving the U.S., Israel, and Iran, coupled with the government’s decision not to deploy fuel price stabilization funds for the current pricing cycle.

EPRA Director General Edward Mwirigi Kinyua explained that the regulator decided against drawing down available stabilization reserves in order to preserve funds for potential future spikes if global crude prices rise higher.

“September has been the worst month ever since this war broke out. Super petrol has reached USD1,300 per metric tonne from the initial USD600 per metric tonne,” Kinyua told journalists on Wednesday, October 14.

Economic Impact and Financial Outlook

Finance Committee Chairperson Kimani Kuria voiced strong support for the amendment, pointing out that ongoing global instability continues to drive up transportation, production, and broader household expenses across Kenya.

Kuria disclosed that the National Treasury has already forgone roughly Ksh54 billion in revenue over the past six months to sustain existing fuel tax concessions.

While the enactment of the bill guarantees that the lower VAT rate remains in force beyond the initial relief period, ultimate pump prices will still reflect shifts in international crude benchmarks, foreign exchange movement, and other standard pricing parameters in EPRA’s monthly reviews.

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