Kenya’s Agriculture Minister proposes exempting cotton from VAT
Kenyan Agriculture Minister Mr. Rutu has announced that he is proposing to the government to exempt locally produced goods and ginning cotton from value-added tax as a special measure to save the cotton sector.
Mr. Rutu said: “Those ginners who buy cotton from farmers pay 16% VAT when they sell to textile factories. The textile industry is in a dilemma and adequate support should be provided to the textile industry. Exempting VAT is a step in the right direction.”
Mr. Rutu also announced that cotton seeds will be manufactured by the Kenya Seed Company and registered seed wholesalers will be certified by the Kenya Factory Health Inspection Authority.
At a meeting with representatives of the cotton industry, they recommended that the price of cotton should be maintained at 30 shillings/kg to encourage ginners to buy cotton from local producers, and that cotton seed should be provided at a discount. Because cotton farmers cannot afford cotton seeds.
Among other measures to support the cotton industry, Rutu inspected that higher tariffs should be imposed on imported cotton and fabrics, which would lead to higher demand for domestically manufactured products as imported products would be more expensive.
Mr. Rutu also suggested that the additional revenue from the increased tariffs will boost the local cotton industry as it will improve the living standards of 200,000 cotton farmers.
Mr. Rutu concluded that as the textile industry shows signs of recovery following the government’s stimulus package of Sh750 million, these measures will lead to a rapid recovery of the local industry.
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