Manufacturing alcohol, tobacco, bottled water, cosmetics, or a growing list of other excisable goods and services in Kenya without an excise licence is not a minor compliance gap. It is a criminal offence, and goods moved without proper licensing and excise stamps can be seized and forfeited outright. This guide explains who needs an excise licence, how the system works, and the ongoing obligations that come with holding one.

What Is Excise Duty

Excise duty is a tax imposed on specific goods and services manufactured in or imported into Kenya, as listed in the First and Second Schedules to the Excise Duty Act, 2015. Unlike VAT, which applies broadly across most goods and services, excise duty targets a defined list of products and services that the government has chosen to tax more heavily, traditionally items such as alcohol, tobacco, and fuel, but now extended to a wider range including bottled water, juices, cosmetics, betting and gaming, and money transfer services.

Who Needs an Excise Licence

Section 14 of the Act sets out the activities requiring a licence. Anyone manufacturing excisable goods in Kenya, supplying certain excisable services, or importing specified excisable goods must hold a valid excise licence before commencing that activity. This obligation extends well beyond the traditional categories most people associate with excise duty. KRA has confirmed, for example, that any person in the business of bottling, including through refilling, or packaging water must obtain an excise licence as a prerequisite for charging and remitting the duty, regardless of how small the operation. Cosmetics and beauty products falling under specific tariff headings also require excise stamps, and importers of cigarette paper, cigarette packaging materials, and unprocessed tobacco must hold a licence before the goods can even clear customs.

Applying for an Excise Licence

The application process is conducted through iTax. After logging in, an applicant selects the registration tab, then other registration, and then excise licence, completing the required details before submission. For manufacturers, KRA’s licensing checklist requires documentation covering company registration and ownership structure, the physical location and layout of the manufacturing premises, infrastructure capable of supporting the Excisable Goods Management System for stamp application and production accounting, and sector-specific clearances. Alcoholic beverage manufacturers must produce a valid liquor licence, and tobacco manufacturers must obtain clearance from the Ministry of Health covering signage and health warning requirements. Importers face a parallel but separate registration checklist, since an importer’s excise licence is distinct from a manufacturer’s licence even where the same business carries out both activities.

The Excisable Goods Management System and Excise Stamps

Once licensed, manufacturers and importers of most excisable goods must affix excise stamps to their products through the Excisable Goods Management System, commonly known as EGMS. This is a track-and-trace system using secure paper stamps physically affixed to products, or secure digital stamps printed directly onto packaging, allowing KRA to verify that excise duty has actually been paid on goods in circulation. The system was introduced partly in response to large-scale counterfeiting of branded products, since illicit and unstamped goods undermine both government revenue and legitimate manufacturers competing against untaxed competitors. Applications for excise stamps are made through the EGMS system itself, though a person can also initiate the process at an EGMS Service Desk located within KRA Tax Service Offices. Goods found without the required stamp are liable to seizure, and the persons in possession of them may be prosecuted.

Filing Returns and Paying Duty

Licensed manufacturers must pay excise duty on goods removed from their factory during a calendar month by the twentieth day of the following month, with one important exception: manufacturers of alcoholic beverages must pay by the fifth day of the following month, a materially shorter window that alcohol producers in particular need to build into their cash flow planning. Suppliers of excisable services follow the same twentieth-day deadline as manufacturers, while importers must pay duty at the time of importation itself, processed through the East African Community Customs Management Act framework rather than the monthly return cycle.

Late payment carries a penalty of 5 percent of the tax payable under the return, or KES 10,000, whichever is higher. Given how this penalty is calculated, the fixed KES 10,000 floor means even small or delayed remittances on modest production runs can trigger a disproportionately large penalty relative to the underlying liability, which is worth factoring into compliance planning for smaller manufacturers entering the excise system for the first time.

Suspension and Cancellation of a Licence

An excise licence is not a one-time grant that can be relied upon indefinitely regardless of conduct. The Act gives the Commissioner power to suspend or cancel a licence where a licensed person fails to comply with the conditions attached to it or with the broader obligations under the Act, and the consequences of suspension or cancellation can include an immediate halt to lawful manufacturing or importing activity until the matter is resolved. Businesses should treat ongoing excise compliance, accurate record-keeping, timely returns, and proper use of the EGMS system, as integral to maintaining the licence itself, not as a separate administrative task that can be deprioritised once the initial licence is granted.

Excise Duty on Digital and Financial Services

The scope of excise duty has expanded considerably in recent years beyond physical goods. Money transfer services, including sending and withdrawal of money, attract excise duty, as do other fees charged by financial institutions in connection with their licensed activities. Advertising fees charged for promoting alcoholic beverages, betting, gaming, lotteries, and prize competitions across internet, social media, television, print, billboards, and radio are also excisable, currently at a rate of 15 percent. Businesses operating in fintech, media, and advertising sectors that have not traditionally thought of themselves as touching excise duty should review whether recent amendments to the First and Second Schedules have brought any part of their revenue model within scope, since the list of excisable services has been expanding through successive Finance Acts.

How Excise Licensing Interacts With Other Regulatory Regimes

Excise licensing rarely sits in isolation from a business’s other regulatory obligations. A betting or gaming operator, for instance, needs both a betting licence from the BCLB and excise registration for the duty payable on amounts wagered, while a manufacturer bringing a new alcoholic beverage to market needs both the underlying liquor licence and the excise licence before production can lawfully begin. Businesses structuring a new product launch or market entry should map out the full licensing stack early, since missing one licence in the sequence can delay or block the others.

Beyond the return and payment obligations, licensed manufacturers and importers must maintain accurate production and stock records for inspection by KRA at any time. Poor record-keeping is one of the most common findings in excise compliance audits, and discrepancies between declared production volumes and actual stock movements are treated as a serious compliance red flag rather than a clerical oversight.

How We Can Help

Clay & Associates Advocates advises manufacturers, importers, and service providers on excise licensing applications, EGMS compliance, and disputes arising from suspended or cancelled licences. If you are launching a new excisable product line, expanding into excisable services, or facing an excise compliance issue with KRA, our regulatory and compliance team can guide the licensing process and advise on the surrounding obligations. Where excise issues escalate into a formal dispute with KRA, this work often connects with Tax Appeals Tribunal proceedings.

For the governing legislation, see the Excise Duty Act, 2015 on the Kenya Law website.