Higher levy on factory goods triggers legal fight

BY SAM KIPLAGAT

The government’s move to raise additional revenue by increasing the Standards Levy has triggered a legal challenge, with a petitioner arguing that the decision is irrational and violates manufacturers’ legitimate expectations.

In an urgent application before the High Court, the Green Thinking Action Party (GTAP) claims the new levy provisions will cripple the operations of manufacturers.

The Kenya Bureau of Standards (KEBS) gazetted the Standards (Standards Levy) Order, 2025 in August last year.

The levy is now calculated at 0.2 per cent of monthly sales, net of Value Added Tax, excise duty and applicable discounts. It was previously charged at 0.2 per cent of the ex-factory price and capped at an annual total of Sh400,000.

The changes lifted the annual cap to Sh4 million for the first five years and to Sh6 million in the next five years.

The levy is recoverable at source, with payments to be made through the Kenya Revenue Authority on or before the 20^th day of the following month.

GTAP argues that the increase was implemented in violation of the constitution and in a discriminatory, unreasonable and unfair manner.

“In sum, this application and petition seek to challenge the constitutionality of the Standards Levy payable monthly by selected classes of manufacturing entities, “GTAP says.

The court heard that unlike previous legal notices, the ministry of investments, Trade and Industry focused solely on revenue generation at the expense of manufacturers and Kenyans at large, with no clear benefit to the industries paying the levy.

GTAP further stated that the new levy is expected to double KEBS’s annual revenue from Sh700 million to about Sh1.4 billion. The party’s deputy secretary-general, Mr. Harizon Ochieng, said manufacturers would not benefit in any way from what he described as a punitive and illegal levy.

This is unprecedented, illegal, unreasonable, and irrational, and goes against the legitimate expectation that adjustments of such rates would be progressive rather than drastic, he said.

 GTAP also accused the ministry of unlawfully expanding the definition of “manufacturers” to include sectors such as energy generation, software development, Computer engineering installation, repair and maintenance, and dry cleaning.

According to GTAP, the government has departed from the original intention of the Standard Levy Order, which was to promote standardisation, quality control, laboratory testing, and measurement skills.

Instead, the party argues that the levy has become a revenue-generating “cash cow”, collected in a manner that is not in the best interests of manufacturers and industries.