The Ghana Revenue Authority (GRA) has rejected claims that the new Value Added Tax (VAT) regime will increase consumer prices or distort market competition, describing concerns raised by the Abossey Okai Spare Parts Traders Association as a fundamental misunderstanding of the system.
In a press release issued on Tuesday, the Authority responded to the Association’s warning of a possible one week strike over VAT changes introduced under the Value Added Tax Act, 2025 (Act 1151), which took effect on January 1, 2026.
The GRA explained that although the VAT rate moved from a 4 percent flat rate to a standard 20 percent, traders can now claim back the full VAT paid on their purchases, something not allowed under the old system.
Under the previous system, traders paid input VAT of 21.9 percent on purchases but could not reclaim it, making it part of their cost. Under the new regime, traders can claim back the 20 percent input VAT, lowering their effective cost base.
Using a GH₵500 base price example with a 20 percent profit margin, the GRA explained that the trader’s cost under the old system rose to GH₵609.50 due to non deductible input VAT, whilst under the new system the cost remains GH₵500 because input VAT is reclaimable. The final consumer price under the new regime would be GH₵720 compared to GH₵760.66 under the old system, making it cheaper by GH₵40.66.
The Authority said any observed price increases are likely due to traders applying the 20 percent output VAT whilst still treating input VAT as part of their cost, which amounts to a transitional pricing error rather than a policy flaw.
The GRA dismissed concerns that the higher VAT registration threshold could distort competition. It explained that non registered traders still pay VAT on purchases but cannot claim it back, whilst registered traders recover input VAT and operate on a lower cost base. Despite different tax treatment, both can sell goods at similar final prices when profit margins are applied.
The increase in the VAT registration threshold to GH₵750,000, up from GH₵200,000, is intended to relieve smaller businesses from administrative burdens rather than create unfair competition.
The Authority said the new VAT system reduces the effective tax rate from 21.9 percent to 20 percent, eliminates the COVID 19 Health Recovery Levy, allows full input VAT deductibility, removes cascading tax on tax effects, and introduces a simplified unified structure.
The GRA noted that traders now operate with a nearly 18 percent lower cost base and that reforms are designed to improve transparency, compliance, and efficiency.
To support businesses during the transition, the Authority 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 pricing. The GRA indicated it is ready to extend similar support to the Abossey Okai Spare Parts Traders Association.
The Abossey Okai traders issued their warning on Saturday, February 8, 2026, stating that the 20 percent VAT rate is hurting pricing, competitiveness, and compliance. They claimed an item previously sold for GH₵500 with GH₵20 VAT now attracts GH₵100 in tax, pushing the final price to GH₵600, and proposed a simplified VAT scheme with rates between 5 and 8 percent.
The Value Added Tax Act, 2025 (Act 1151) abolished the VAT Flat Rate Scheme and introduced a standard 20 percent rate comprising 15 percent VAT plus 2.5 percent National Health Insurance Levy (NHIL) and 2.5 percent Ghana Education Trust Fund (GETFund) levy, both now fully deductible as input taxes.
