Gov’t extends 8% VAT relief on fuel, injects Ksh.945M subsidy

The government has extended the application of the reduced 8 per cent Value Added Tax (VAT) on petroleum products for a further three months until October 14, 2026, and approved a Ksh.945 million subsidy for the July–August fuel pricing cycle to cushion consumers from rising global oil prices.

Energy and Petroleum Cabinet Secretary Opiyo Wandayi on Tuesday said the interventions are aimed at shielding households and businesses from renewed volatility in international energy markets following escalating tensions in the Middle East.

He said the state would also tap the Petroleum Development Levy to keep pump prices stable.

"As part of the Government's commitment to cushioning households and businesses from international market volatility, in consultation with the National Treasury, we have extended the application period for 8% of Value Added Tax (VAT) on petroleum products for a further three months, until 14th October 2026,” he stated.

"Further, in the July-August 2026 pricing cycle, the Government will deploy a subsidy from the Petroleum Development Levy to the tune of Ksh.945 Million to sustain the current price levels."

The relief measure was first introduced by President William Ruto in April when the government cut VAT on fuel from 16 per cent to 8 per cent for three months and released additional funds to cushion motorists following an earlier spike in global oil prices.

On the state of fuel in the country, Wandayi reassured that despite renewed military escalation around the Strait of Hormuz, Kenya's petroleum supply remains stable and uninterrupted.

"Against this backdrop, I wish to assure all Kenyans that these global developments have not affected the availability of petroleum products in our country. Fuel remains readily available across the country, supported by adequate national stocks, a resilient and fully operational import and distribution system, and the continued success of the Government-to-Government (G2G) fuel supply arrangement,” Wandayi noted.

According to the CS, commercial shipping through the Strait of Hormuz has declined while global oil markets remain volatile, but Kenya has not experienced supply disruptions.

He attributed fuel stability to the Government-to-Government fuel import arrangement, which he said has insulated the country from rising freight and insurance costs that have affected countries relying on spot market purchases.

"While importers who depend on spot purchases and open tenders have watched their freight and insurance costs climb again with each fresh disruption, Kenya has continued to pay the same fixed freight and premium," he explained.

Wandayi noted that although international oil benchmarks have started rising again following the renewed Middle East conflict, the government will continue working to ensure stable fuel supplies and minimise the impact on consumers.

He underscored that the government has strengthened the petroleum supply chain over the past few years, enhancing the country's ability to withstand external shocks.

"These interventions reflect our broader commitment to protecting consumers, supporting businesses and safeguarding the economy from external shocks while ensuring that petroleum products remain as affordable as possible under prevailing global market conditions," he noted.

The CS thus assured motorists, public transport operators, manufacturers, farmers, businesses and investors that the country has sufficient fuel stocks and that the government will continue taking measures to guarantee uninterrupted supply despite ongoing uncertainty in global energy markets.

President Ruto assented to the Value Added Tax (Amendment) Bill, 2026 on April 17 this year, effectively slashing VAT on petroleum products from 16 per cent to 8 per cent in a move aimed at quelling the uproar that arose following the recent sharp hike in fuel prices. 

The Bill, sponsored by National Assembly Majority Leader Kimani Ichung'wah, followed a request from the Executive to urgently address the impact of the ongoing conflict in the Middle East on petroleum supply.

Lawmakers introduced, debated and passed the Bill on April 16, 2026, without amendments, highlighting the urgency of the intervention.