Manufacturers want a 433 per cent excise duty hike on imported industrial sugar reversed, as the dispute returns to the High Court in Nairobi on today.
The Kenya Association of Manufacturers (KAM) filed a constitutional petition at the Milimani High Court last week, challenging the increase under the Finance Act, 2026.
It argues that the increase from Sh7.50 to Sh40 per kilogramme is placing an additional financial burden on businesses that rely on industrial sugar.
The case is set for a mention tomorrow (October 15) to confirm compliance with court directions and receive further instructions.
The court has given the case priority treatment, with Justice David Mburu certifying the application as urgent in directions issued on October 7.
The court directed KAM to physically serve the application, petition and court directions by close of business on October 8 and file proof of service.
The respondents were given seven days from the date of service to file and serve their responses to the application and petition.
KAM has warned that the higher tax will raise production costs, weaken regional exports and put thousands of jobs at risk.
Main uses include in beverages and soft drinks, alcoholic drinks, dairy products (sweetening and formulation of milk drinks, yogurt, and related dairy goods) and confectioneries and chocolates.
It is also used in processed foods and condiments (production of tomato sauce, jams, juices, and canned foods) and pharmaceuticals (used as an excipient or base ingredient in select medicinal and pharmaceutical products).
KAM has challenged Section 36(a)(vi) of the Finance Act, 2026, which introduced the higher rate effective July 1, arguing that the measure threatens the competitiveness of locally manufactured products in Kenya and the wider East African Community market.
The manufacturers’ lobby estimates that the increase could add Sh6 billion to manufacturers’ annual costs, with capacity utilisation in affected industries potentially falling by as much as 50 per cent.
About 3,000 jobs and more than 300 internship and apprenticeship opportunities could also be at risk if companies are unable to absorb the additional cost of the raw material.
“Industrial sugar is a critical production input rather than a finished consumer product and taxing it heavily increases the cost of making goods locally and could undermine efforts to expand manufacturing, attract investment and create employment,” KAM urgues.
The association further says the higher duty, combined with other taxes, levies and port charges, pushes the total fiscal burden on imported industrial sugar to about 90 per cent of its cost, insurance and freight (CIF) value.
This could make locally manufactured goods more expensive and leave Kenyan producers struggling to compete with regional rivals.
KAM is particularly concerned about the implications for trade within the EAC, where Uganda and Tanzania do not impose excise duty on industrial sugar, according to the petition.
The association says about 90 per cent of Kenya’s exports in the affected product categories are destined for the regional market, exposing manufacturers to the risk of losing business to producers operating under more favourable tax regimes.
Higher production costs could force companies to review their pricing, output, investment and employment decisions as they seek to remain competitive against imports and manufacturers in neighbouring countries.
The association is also challenging the process through which the new tax rate was introduced, arguing that the Sh40 per kilogramme provision was not included in the Finance Bill, 2026 as initially published for public participation, but was subsequently introduced on the floor of the National Assembly.
It wants the High Court to determine whether the amendment complied with constitutional requirements on public participation.
KAM is seeking a declaration that the contested provision is unconstitutional and an order quashing the amendment, which would restore the previous excise duty rate of Sh7.50 per kilogramme.
The outcome could influence the cost of locally produced goods, the ability of Kenyan firms to compete in regional markets and the industry’s capacity to sustain jobs and investment.
The respondents named in the case include the State Law Office and the Kenya Revenue Authority.
Thursday’s mention will allow the court to establish whether the parties have complied with the directions and determine the next steps in the proceedings.
The urgency certification does not amount to a ruling on the merits of KAM’s challenge or its request for conservatory orders, hence the disputed Sh40 per kilogramme rate therefore remains in force unless the court orders otherwise.
