The Tax Appeals Tribunal has upheld Kenya Revenue Authority’s (KRA) Value Added Tax (VAT) demand of Kshs.333,320 against CMC Di Ravenna after input VAT claims was disallowed.
CMC Di Ravenna had challenged KRA’s VAT demand on the grounds that it had accumulated VAT input claims of Kshs. 147 million which it sought to use to offset the VAT demand. The input VAT claims had not been validated by KRA.
In a judgement dismissing CMC Di Ravenna’s appeal, the Tribunal held that KRA lawfully disallowed the Kshs. 147 million input VAT for the year 2016- 2017.
CMC Di Ravenna’s case was that its services were VAT exempt and relied on an alleged private ruling issued by KRA dated 20th December, 2016 and confirmed on 16th May 2017. CMC Di Ravenna submitted that the said two letters created the believe that supplies made to an official Aid funded project were zero rated and not VAT exempt thus creating legitimate expectation.
In response, KRA questioned why CMC Di Ravenna applied for a private ruling in matter where the law was very clear and whether it was necessary in the circumstances. In addition, KRA relied on a letter from the National Treasury dated 30th May 2016 which had advised CMC Di Ravenna that goods and services supplied to Itare Dam Project are exempt from Customs Duty and Value Added Tax as provided for under the East African Community Customs Management Act 2004 and the Value Added Tax Act, 2013.
CMC Di Ravenna in its submissions to failed to produce its letter dated 10th November, 2016 applying for the said private ruling in order to enable the Tribunal scrutinize the same as to whether the same met the threshold envisaged under Section 67 (3) of the Tax Procedures Act, 2015.
The Tribunal agreed with KRA’s arguments and dismissed the Appeal and as a result upheld KRA’s additional assessment of Kshs. 333,220 as due and payable.