The Kenya Association of Manufacturers (KAM) has warned that the prices of medications could increase by up to Ksh90, due to the proposed changes in tax application in the Finance Bill 2025. KAM cautioned that the proposed shift in VAT treatment of pharmaceutical inputs in the Finance Bill 2025 could raise medicine prices by at least 5 per cent starting on July 1. While presenting its final submissions at the conclusion of the Finance Bill 2025 stakeholder hearings last Friday, the association opposed a proposal to change the VAT status of raw materials used in pharmaceutical manufacturing from zero-rated to exempt. The suggested change in the Finance Bill 2025 would significantly affect the tax treatment of raw materials used in pharmaceutical manufacturing.
Shelves inside a pharmacy.
Photo MintyGreen Under the current zero-rated regime, pharmaceutical firms benefit from charging 0 per cent VAT on their products while also being able to claim refunds on the VAT paid for inputs such as chemicals and packaging materials.
This system helps reduce production costs and keeps medicine prices affordable for consumers.
