Firms involved in co-manufacturing face changes in their factory operations after the Treasury set new rules requiring them to separately store their raw materials and packaging as part of a strategy to improve tax accountability.
In changes through the new Excise Duty (Amendment) Regulations, 2023, Treasury Cabinet Njuguna Ndung’u said excisable co-manufactured goods will also be stored separately to facilitate comprehensive accounting.
“Regulation 12 of the principal Regulations is amended by inserting the following new sub-regulation immediately after sub-regulation (1)— (1A) A co-manufacturer shall keep the raw materials or immediate goods used for the co-manufacturing separately to allow for the accounting of the materials in the factory,” the new rule said.
“Regulation 13 of the principal Regulations is amended by inserting the following new sub-regulation immediately after sub-regulation (3)— (3A) Excisable goods in an excise stock room for the co-manufacture of goods shall be stored separately in such a manner as to facilitate the accounting for the goods therein” it added.
Previously, some co-manufacturers jointly stored raw materials and processed products raising concerns that some of them may be escaping tax obligations.
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In further changes, the Treasury said the owners of all locally co-manufactured excisable goods will be required to provide detailed records of raw materials received and removed from their premises; production records at every stage of the manufacturing process; packaging materials received and utilised in their premises; details of goods removed from the factory; readings of measuring and metering devices for each co-manufacture production run; and sales records.
The sale of goods and services covered under the excise tax law, including beer, juice, mobile phone airtime, cigarettes, and petroleum are now monitored in real-time as the taxman moves to end tax leaks.
Under a recently implemented law, manufacturers are required to send real-time data on their daily sales via internet-enabled electronic tax registers(ETRs) which are linked to the Kenya Revenue Authority (KRA) systems.
Under the new system, the KRA will receive sales and invoice data from all registered firms and traders daily in a fresh push to boost revenue collections and curb tax evasion. The law requires all businesses with an annual turnover of at least Sh5 million to have ETRs.
The Internet-enabled ETRs come with several unique features. For example, it captures the personal identification number (PIN) of the gadget’s buyer. The capture of the buyer’s PIN is however optional when generating an invoice and is only applicable where the purchaser intends to claim input tax for the VAT paid.
Traders are required to seek the taxman’s nod to perform any other business the next day under the new system, meaning incorrect or incomplete data logged the previous day could lock them out.
The new ETRs also have a control unit serial number issued by KRA to identify each tax register beside a control unit invoice number which is a unique number generated by the tax register upon issuance of each tax invoice.
The gadgets also come with a Quick Response (QR) code which helps one to confirm the validity of the tax invoice. Excise duty is the third largest tax head at Sh252 billion in the financial year 2021/22. This is expected to rise to Sh297 billion this financial year. BY DAILY NATION