The Ghana Revenue Authority(GRA) has dismissed claims by the Abossey Okai Spare Parts Traders Association that the newly introduced VAT regime will lead to higher consumer prices, market distortions and unfair burdens on spare parts dealers.
This was contained contained in a statement issued by the Communications and Public Affairs Department of GRA. The statement described the concerns as stemming from a misunderstanding of how the new VAT system under the Value Added Tax Act, 2025(Act 1151) operates.
According to the GRA, the shift from the previous 4 per cent Flat Rate Scheme to a uniform 20 per cent VAT rate will not increase prices when properly applied. Under the old system, traders paid an effective input VAT of 21.9 per cent on purchases, which could not be deducted and therefore formed part of their cost. Under the new regime, the 20 per cent input VAT is fully deductible, allowing traders to recover it and operate on a lower cost base.
Using a sample base price of GH¢500, the GRA explained that a trader’s actual cost under the old system was GH¢609.50, but falls to GH¢500 under the new regime. When a 20 per cent profit margin is applied, the final price to the consumer drops from GH¢760.66 under the old system to GH¢720 under the new regime.
The Authority stressed that any current price increases are the result of traders mistakenly applying the 20 per cent output VAT on top of cost figures that still include now-deductible input VAT.
The GRA also rejected claims that the increase in the VAT registration threshold to GH¢750,000 would distort competition. It explained that non-registered traders still pay VAT on their purchases but cannot reclaim it, while registered traders can claim input VAT and price their goods on a lower cost base—resulting in the same final price for consumers.
The Authority noted that the higher threshold is intended as a relief measure to exempt smaller traders from the administrative burden of VAT registration and filing.
Highlighting benefits of the new VAT regime, the GRA pointed to a lower effective tax rate, abolition of the one per cent COVID-19 Health Recovery Levy, full input VAT deductibility, elimination of cascading taxes, and a simplified and unified VAT structure.
To support businesses through the transition, the GRA has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to provide guidance on VAT record-keeping, input tax claims, and correct pricing. The Authority said it is prepared to extend similar support to the Abossey Okai Spare Parts Traders Association and other trade groups.
The GRA called on all stakeholders to engage constructively and take advantage of the benefits of the new VAT regime, reiterating that the policy does not increase consumer prices or distort competition when correctly implemented.
