The Value Added Tax (Amendment) Act, 2026 has been signed into law. Effective 15th April 2026, VAT on three petroleum products drops from 16% to 8% with effects on VAT-registered traders in the supply chain.
What the Bill Changes
Section 5 of the VAT Act previously applied the standard 16% rate to petroleum products. The amendment inserts a new subsection that reduces VAT specifically on three products to 8%:
- Premium gasoline (Motor Spirit)
- Illuminating Kerosene
- Automotive Gas Oil (diesel)
The reduced rate applies for 90 days from 15th April 2026. The Cabinet Secretary for Finance may extend it by a further 90 days through a Gazette notice, without requiring a new Act of Parliament.
Implications on Taxpayers
A drop from 16% to 8% on the VAT component should translate to lower prices for petrol, diesel and kerosene.
VAT-registered businesses that purchase fuel as an input will see the tax change affecting their input VAT calculations.
Taxpayers that claim input VAT on fuel will be claiming lower input VAT and this will certainly have an impact on the business cashflow.
Taxpayers that sell fuel will charge output VAT at 8% and will have to update eTIMS setup to reflect the correct rate from 15th April 2026.
Taxpayers in logistics, transport, manufacturing, agriculture and construction where fuel is a major operating cost, the input cost reduction will improve taxpayer margins.
Impact on VAT Return Filing
The rate change introduces a compliance requirement that VAT-registered businesses cannot ignore.
VAT returns for the period covering 15th April 2026 onwards must reflect the 8% rate on the three affected petroleum products.
The temporary nature of the reduction means taxpayers will file returns with two different rates across a transition period
If the Cabinet Secretary does not extend the reduction, it reverts after 90 days and taxpayers will need to update their systems.
Input tax claims need to match what suppliers charge. If a supplier invoices fuel at 16% after the reduction takes effect the invoice is incorrect and the taxpayer will not be able to claim more input VAT than the law allows on the transaction.
Taxpayers should review their eTIMS invoicing configuration from 15th April 2026 and confirm that their accounting system applies the correct rate by product and period.
This is a short window for taxpayers and getting it right protects margins and maintains compliance.
Contact Intelpoint Consulting if you need help reviewing your VAT position or updating your filing your approach.