The Ministry of Finance has set forth a comprehensive proposal to amend the Excise Duty Act, introducing a range of changes aimed at reshaping tax policies to both stimulate certain sectors and increase revenue streams for the government.
The proposed amendments cover a wide spectrum, including tax exemptions, levies on fuel products, adjustments to excise duty rates on various goods, and the refinement of definitions within the existing legislation.
One of the key proposals is the exemption of taxes on electric cars manufactured within Uganda, as well as on the electric vehicles’ charging equipment assembled locally. This move aligns with global trends towards sustainability and incentivizes the burgeoning electric vehicle industry, fostering innovation and reducing carbon emissions.
Furthermore, the proposal extends tax exemptions to essential agricultural inputs such as hoes, pesticides, fertilizers, seedlings, and cooking stoves utilizing ethanol. By exempting these items from Value Added Tax (VAT), the government aims to support the agricultural sector, which is a vital component of Uganda’s economy, while also promoting environmentally friendly cooking practices through the use of ethanol-based stoves.
However, alongside these exemptions, the Ministry of Finance has suggested imposing taxes on fuel products, a move that could potentially impact consumers’ expenses. Motor spirit (gasoline), gas oil (automotive), and illuminating kerosene are all earmarked for taxation under the proposed amendments. With tax rates proposed at Shs1550 per litre for gasoline, Shs1230 per litre for automotive diesel, and Shs500 per litre for illuminating kerosene, consumers may face increased costs for these essential energy sources.
In addition to these changes, the proposed amendments include adjustments to excise duty rates for various products, particularly construction materials and beverages. Cement, adhesives, grout, white cement, or lime may see an increase in excise duty tax rate, potentially leading to higher market prices for these construction essentials. Similarly, mineral water, bottled water, and other beverages intended for drinking could face a tax equivalent to 10% of the retail price or Shs75 per litre, whichever is higher.
These proposed changes build upon previous amendments to the Excise Duty Act, 2023, which introduced definitions for “fruit juice,” “un-denatured spirits,” and “vegetable juice.” These refined definitions aim to provide clarity and consistency in the application of excise duties, particularly concerning alcoholic beverages and non-alcoholic beverages derived from fruits and vegetables.
The excise duty rate for opaque beer is set at either 12% of the retail price or Shs 150 per litre, whichever is higher. For un-denatured spirits with an alcoholic strength by volume of 80% or more made from locally produced raw materials, the proposed excise duty rate is set at 60% of the retail price or Shs 1500 per litre, whichever is higher.
Other un-denatured spirits, whether locally produced or imported, with an alcoholic strength by volume of less than 80%, are subject to an excise duty rate of either 80% of the retail price or Shs 1700 per litre, whichever is higher. However, spirits used in the production of disinfectants and sanitizers for COVID-19 prevention are exempt from excise duty.
Excise duty rates for fruit juice and vegetable juice are set at 12% of the retail price or Shs 250 per litre, whichever is higher, unless the juice is made from at least 30% pulp or juice by weight or volume of the total composition and sourced from locally grown fruits and vegetables.
Non-alcoholic beverages locally produced, excluding those made from fermented sugary tea solutions with yeast and bacteria, are subject to an excise duty rate of 12% of the retail price or Shs 150 per litre.
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