High Court dismisses Mars Logistics Limited appeal on goods in transit VAT


High Court has dismissed an appeal by Mars Logistics Limited challenging a decision by the Tax Appeal Tribunal that ruled that transportation of goods in transit attracts Value Added Tax at the rate of 16%. 

The tribunal had ruled that the company’s sole business offered transport services for transit goods that were taxable under the VAT Act. 2013 as submitted by the Kenya Revenue Authority.

According to tribunal, transportation services that end outside Kenya are not exported services and thus taxable. The First Schedule to the VAT Act, 2013 exempts VAT from services offered in relation to goods in transit. 

The VAT Act 2013, states that transportation of goods in transit is not zero-rated nor was it exempted from VAT. The court therefore upheld the findings of the TAT that in order to qualify for zero-rated status, the service should be specifically provided in the law. The Court emphasized that services offered in relation to goods in transit were previously zero-rated but under the VAT Act, 2013 they were not.

High Court also dismissed Mars Logistics Limited’s contention that the provisions of the Finance Act, 2014 on exemption from VAT of supply of services in respect of goods in transit as read together with the VAT Act, 2013 created ambiguity.

The tribunal had further held that the company was not entitled to claim exempt status for the sale of motor bikes because the motor bikes were not exempt. High Court held that under the VAT Act 2013, the determination of whether the services are exported out of the country is that the same must be for consumption outside Kenya. 

“Consumption is not determined by reference to the payer, location of the service payer or of the person who is requisitioning for the service, but the place where the services are consumed. The court finds that the transport services were consumed in Kenya and had not been exported,” the judge ruled.