The Ghana Revenue Authority (GRA) has dismissed assertions by the Abossey Okai Spare Parts Traders Association that the newly introduced Value Added Tax framework under the VAT Act, 2025 (Act 1151), will trigger price hikes, create unfair competition, and place additional strain on businesses.
In a response to the concerns, the Authority said the criticisms stem from a misinterpretation of how the revised VAT system works.
According to the GRA, moving from the 4 per cent flat rate scheme to the standard 20 per cent VAT rate will not automatically raise prices. It explained that under the previous flat-rate arrangement, traders could not deduct input VAT of 21.9 per cent paid on purchases. Under the new regime, however, input VAT is fully recoverable, effectively lowering traders’ cost base.
To demonstrate its point, the GRA provided an example using a base price of GH¢500. With a 20 per cent profit margin, it said a trader would charge GH¢720 under the new system — which is GH¢40.66 lower than what would have been charged under the former flat-rate model.
The Authority stressed that any current price increases are likely due to traders mistakenly factoring deductible input VAT into their cost calculations.
On the issue of competition, the GRA rejected claims that raising the VAT registration threshold to GH¢750,000 would distort the market. It explained that traders who are not registered still pay the 20 per cent VAT on their purchases without the ability to reclaim it, while registered traders can recover input VAT and price their goods from a lower cost base. In both cases, the final selling price to consumers remains the same, the Authority said.
The higher registration threshold, it added, is intended to ease the administrative burden on smaller businesses rather than disadvantage any group.
Highlighting the broader objectives of the reform, the GRA listed key advantages of the new VAT system, including a reduced effective tax rate, the removal of the COVID-19 Health Recovery Levy, elimination of cascading taxes, full input tax recovery, a streamlined tax structure, and lower operating costs for businesses.
The Authority maintained that the policy itself is not responsible for any observed price adjustments, attributing them instead to temporary misapplications during the transition period.
To ensure a smooth rollout, the GRA said it has formed a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to assist traders with compliance, record-keeping, input tax claims, and accurate pricing. It expressed readiness to offer similar support to the Abossey Okai traders and other business groups.
The Authority urged stakeholders to approach the reform constructively, describing it as a significant move toward reducing hidden tax pressures and improving the business environment in Ghana.