The Ghana Revenue Authority (GRA) has pushed back against claims by the Abossey Okai Spare Parts Traders Association that the new Value Added Tax regime under the VAT Act, 2025 (Act 1151), will increase consumer prices, distort competition, and burden traders.
According to a statement from the GRA, the worries are a result of a basic misinterpretation of the new system. “The change from the 4% Flat Rate to 20% will not result in increased prices,” the Authority said, explaining that under the old flat-rate scheme, input VAT of 21.9% on purchases was not deductible.
Input VAT is now fully deductible under the new system, thereby lowering traders’ expenses and eventually benefiting consumers. The GRA used a base price of ¢ 500 to illustrate the change. A trader with a 20% profit margin will charge GH¢720 under the new system — GH¢40.66 less than the old flat-rate system.
Price increases occur only when traders mistakenly add now-deductible input VAT to their cost base, the Authority explained. Addressing concerns about market competition, the GRA noted that the higher VAT registration threshold of GH¢750,000 does not distort prices.
Non-registered traders still pay 20% VAT, which cannot be claimed back, while registered traders recover their input VAT and build pricing on a lower cost base. “The final price to the customer is identical: GH¢720,” the statement said. The increase in the threshold is a deliberate relief measure to reduce administrative burdens on smaller traders.
The GRA outlined several benefits of the new VAT regime: a lower effective tax rate, abolition of the COVID-19 Health Recovery Levy, elimination of cascading taxes, full input VAT deductibility, simplified tax structure, reduced cost of doing business, and frictionless input VAT recovery built into the existing self-reporting system.
The Authority emphasised that observed price increases are transitional errors, not policy driven. The statement said, “The price increases currently being observed are the result of a transitional pricing error — the failure to remove now-deductible input VAT from cost calculations — and not a consequence of the policy itself.”
To support businesses during the transition, the GRA has set up a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to guide traders on record-keeping, input tax claims, and correct pricing. The Authority stated that it is prepared to offer the Abossey Okai Spare Parts Traders Association and other trade associations a comparable level of assistance.
The GRA called on all stakeholders to engage constructively and take full advantage of the reform, which it described as a major step in reducing hidden tax burdens and lowering the cost of doing business in Ghana.
