By Benadeta Mwaura - Reporter
Kenya, 16 January 2026 - The High Court has temporarily blocked the implementation of a controversial new factory levy, dealing a blow to the government’s revenue-raising plans and offering relief to Kenya’s manufacturing sector amid fierce opposition and legal challenge.
In a lawsuit filed by the Green Thinking Action Party (GTAP), the High Court preserved the status quo on the Standards (Standards Levy) Order, 2025, a legal notice that significantly increased the mandatory monthly standards levy payable by manufacturers to the Kenya Bureau of Standards (KEBS).
That means the government cannot enforce the levy while the case plays out through the courts.
The Standards Levy Order, 2025 (Legal Notice No. 136 of 2025) sought to replace an older framework with a broader, more onerous regime requiring manufacturers to remit 0.2 % of their monthly turnover (net of VAT and excise) to KEBS, up from a much lower capped amount under the previous 1990 order.
The new ceiling was set at KSh 4 million per year for the first five years and KSh 6 million thereafter.
The expanded scope also included an unusually wide range of sectors under the definition of “manufacturers,” extending beyond traditional factory production to areas such as software development, electrical installation and other services subject to the levy, a change that triggered alarm among industry leaders and small business owners.
Industry stakeholders had warned that the reform would significantly raise production costs, erode competitiveness, and deter investment, especially for medium and large firms already struggling with high operational expenses.
In its interim ruling, the High Court agreed to preserve the existing legal position pending full adjudication of the case.
The petition by GTAP alleges that the new levy, with increases of up to 900, 1,400 % in some cases, is unconstitutional, discriminatory and unreasonable, and that it was enacted without meaningful public participation or a Regulatory Impact Assessment as required under Kenyan law.
The petitioners argued the order violated Article 10 (national values) and Article 201 (taxation principles) of the Constitution by imposing an excessive levy that could cripple businesses.
The expanded definition of “manufacturers” was also cited as unlawful, encompassing non-manufacturing sectors that do not align with the levy’s original purpose of promoting quality standards.
The Ministry of Investments, Trade and Industry and KEBS had defended the levy as a tool to strengthen Kenya’s standardisation infrastructure, provide predictable funding for quality assurance, and enhance competitiveness in domestic and international markets.
More from Kenya
Advocates pointed to exemptions for small manufacturers with annual turnover below KSh 5 million, designed to protect micro and small enterprises.
However, manufacturers, including large industrial firms, argued that the steep increase from the old capped amounts to substantially higher annual bills would inflate production costs, potentially leading to job losses, reduced investment and higher prices for consumers.
The legal fight over the Standards Levy is the latest in a series of disputes over government revenue measures perceived as burdensome or imposed without adequate participation.
Previously, other tax changes, including fuel, housing and inspection charges, have faced scrutiny and judicial review for failing to meet constitutional requirements for fairness and transparency.
For manufacturers, the court’s interim decision provides temporary relief and ensures businesses won’t face immediate new compliance costs or penalties.
But it also opens the door to a broader debate on how Kenya funds regulatory bodies without stifling industrial growth, particularly as the country navigates economic challenges, global competition and efforts to catalyse domestic production.
The matter has been set for further hearings, with the court to issue additional directions as the full case proceeds.
For now, the High Court’s order preserves the existing levy framework and prevents the government from collecting under the contested regime until a final determination is made.
