Fuel dealers warn of closures over KRA’s Sh1m eTIMS penalties

Independent fuel dealers have warned of possible business closures and job losses as the Kenya Revenue Authority (KRA) intensifies enforcement of the electronic tax invoice management system (eTIMS) at petrol stations, with non-compliant businesses facing fines of up to Sh1 million.

The United Energy and Petroleum Association (UNEPEA) says the cost of integrating the system with fuel dispensers is beyond the reach of many independent dealers, particularly those operating in underserved regions.

In a statement dated October 8, association chairperson Irene Kimathi said KRA had been issuing notices of offence to fuel dealers across the country over the past two weeks for failing to integrate their forecourts with the tax system.

UNEPEA estimates that only about 10 per cent of fuel dealers have complied with the requirement, which was rolled out in 2025.

The association is now asking the KRA Board to suspend enforcement immediately and engage industry players to find a less costly way of ensuring tax compliance.

“If KRA closes even half of the fuel stations, which is essentially what they are doing by imposing unattainable requirements and fines, we lose over 20,000 jobs directly,” Kimathi said.

She warned that the closures would come at a time when rising fuel prices had increased the cost of working capital while reduced consumer purchasing power had weakened sales at petrol stations.

According to UNEPEA, automating a petrol station costs between Sh400,000 and Sh1.2 million, depending on the equipment and installation requirements.

With more than 4,000 petrol stations, excluding those with a single dispensing machine, the association estimates that the initial investment across the sector could exceed Sh3 billion.

Dealers must also pay system integrators between Sh20,000 and Sh80,000 monthly, in addition to internet costs required to keep the system operational.

The association argues that the expenses disproportionately affect small independent operators, who have narrower profit margins than multinational oil companies.

“The same expensive upgrade is demanded of every station regardless of its size, so it weighs far more heavily on small independent dealers than on large corporations,” Kimathi said.

UNEPEA further questioned the proposed penalties, warning that a Sh1 million fine could force smaller businesses to shut down rather than absorb the cost.

The association said the additional expenses were being imposed on a sector already facing multiple licensing and regulatory requirements from national agencies and county governments.

Beyond the financial burden, UNEPEA cited technical challenges that it says could disrupt normal business operations.

These include system downtime, unreliable internet connectivity and electricity supply, particularly in remote areas where some independent fuel stations operate.

The association also raised concerns about older fuel dispensers that may not support integration, potentially forcing dealers to replace equipment at additional cost.

It argued that the system could also create discrepancies when fuel is lost during transit, spilt, or dispensed during pump calibration.

Under the current arrangement, the association says, dealers risk being required to account for fuel that does not ultimately translate into sales.

UNEPEA also cited previous investments in tax-compliance equipment that it says became obsolete after KRA introduced subsequent systems.

The association argued that these experiences had made dealers reluctant to commit more money to technology whose long-term viability they questioned.

As an alternative, UNEPEA wants the government to collect value-added tax (VAT) on fuel at the depot rather than relying on the costly forecourt integration system.

Kimathi claimed the association had written to KRA, the Principal Secretary for the National Treasury and the Cabinet Secretary for Energy seeking discussions, but had yet to receive responses.

“We have proposed that VAT be collected at the depot, which will ensure that not a single shilling is lost by the government,” she said.

The association maintained that the proposed approach could safeguard government revenue while easing compliance costs for independent dealers.

It also questioned the public participation process preceding the rollout, saying the consultation had been inadequate and failed to address the challenges facing smaller businesses.

UNEPEA wants the authorities to explain why most dealers have yet to integrate their systems and why efforts to secure dialogue with the relevant government agencies have not yielded results.

The association warned that it would consider further action to protect its members’ businesses and livelihoods if KRA continued with enforcement without addressing their concerns.