GRA dismisses Concerns that new VAT system will increase Prices or distort competition

The Ghana Revenue Authority (GRA) has rejected claims that the new Value Added Tax (VAT) system will raise prices or create unfair competition, particularly for spare parts dealers.

In a statement issued on Tuesday, February 10, 2026, the Authority responded to concerns raised by the Abossey Okai Spare Parts Traders Association. The association argued that the VAT regime introduced under the Value Added Tax Act, 2025 (Act 1151) places additional burdens on traders and could lead to higher consumer prices.

The GRA explained that these concerns are based on a misunderstanding of how the revised VAT framework works.

Under the former 4 percent flat-rate scheme, traders paid 21.9 percent input VAT on purchases, which could not be deducted and was therefore built into the cost of goods. Under the new system, the standard VAT rate is 20 percent, and input VAT is fully deductible, lowering the actual cost base for businesses.

Using an example, the Authority showed that a product costing GH¢500 with a 20 percent profit margin would sell for GH¢760.66 under the old system, but under the new regime, it should sell for GH¢720. “The appearance of higher prices results from traders applying the 20 percent output VAT on top of a cost base that still includes non-deductible input VAT,” the GRA explained.

The Authority clarified that under the new system, businesses declare both input and output VAT in the same return and pay only the difference, instead of passing embedded taxes to consumers.

The GRA also addressed concerns that raising the VAT registration threshold to GH¢750,000 would distort competition. It explained that unregistered traders still pay 20 percent VAT on purchases but cannot claim deductions, while registered traders recover input VAT and price goods from a lower cost base. Using the same GH¢500 example, both registered and unregistered traders would ultimately sell at GH¢720. The higher threshold is intended to ease compliance for small businesses, not to advantage larger ones.

The Authority highlighted additional benefits of the new VAT system, including reducing the effective tax rate from 21.9 percent to 20 percent, removing the 1 percent COVID-19 Health Recovery Levy, allowing full deduction of input VAT (including NHIL and GETFund levies), eliminating cascading “tax-on-tax” effects, and simplifying VAT administration to reduce the cost of doing business.

According to the GRA, a trader’s cost on a GH¢500 item drops from GH¢609.50 under the old system to GH¢500 under the new one, representing an 18 percent reduction.

The Authority noted that recent price increases are not due to the policy itself but to errors during the transition period. “The price increases currently being observed are the result of a failure to remove now-deductible input VAT from cost calculations,” it stated.

To support businesses in adjusting, the GRA has established 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 added that it is ready to provide similar support to Abossey Okai traders and other affected groups.