In a statement sent to bloombergtax.com, the taxman said that a 16% value-added tax would be introduced effective July 1, 2021.
â€œWe cannot at the moment, provide a reliable estimate on the revenue expected to be raised from the imposition of VAT on LPG,â€ KRA added.
The government has been looking on ways to fill the budget deficits using methods such as borrowing and tightening the screws on tax collection.
Unlike the fuel prices, which are adjusted on the 15th of every month, and stay in place for one month, Kenya does not control cooking gas prices.
The introduction of the VAT is expected to result in increased prices, causing a further dent in Kenyan households.
The move was initially supposed to be introduced in 2020 but in light of the pandemic, the government delayed the commencement date by a year.
Both the National Assembly and National Treasury were in consensus that the timing would have caused more problems for Kenyans who were grappling with job losses and reduced income.
The proposals contained in the Finance Bill 2020 mean that the cost of 13-kilogram cooking gas may shoot up by more than Ksh300.
Kenyan households have been enjoying low cooking gas rates since June 2016, when the Treasury abolished the VAT on LPG gas.
The move was meant to encourage more Kenyans to adopt clean energy and discourage the use of paraffin and charcoal.
According to data from the Energy Regulatory Authority, 28 percent of urban households use LPG for cooking compared with kerosene (29 percent) and charcoal (22 percent).