GRA pushes back on Abossey Okai traders, insists new 20% VAT will not raise prices

The Ghana Revenue Authority (GRA) has responded to concerns raised by the Abossey Okai Spare Parts Traders Association over the implementation of the new Value Added Tax Act, 2025 (Act 1151), insisting that the reforms will not lead to higher consumer prices or distort competition.

In a statement dated February 10, 2026, the Authority said it had “noted with concern” claims that the revised VAT structure would impose an unfair burden on spare parts dealers. However, it argued that the concerns stem from “a fundamental misunderstanding of how the new VAT system operates.”

Addressing the shift from the 4% Flat Rate Scheme to the 20% standard VAT rate, the GRA maintained that the change should not result in increased prices if properly applied.

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“Under the new regime, input VAT of 20% is fully deductible as the trader can claim it back from the GRA, resulting in lower costs,” the statement explained.

Using an illustration based on a GH¢500 item with a 20% profit margin, the Authority said the final price to the customer under the old regime would have been GH¢760.66, compared to GH¢720 under the new system. “When input VAT deductibility is properly accounted for, the customer’s final price under the new regime is GH¢40.66 lower than under the old regime,” it stated.

According to the GRA, perceptions of price increases are due to traders applying the 20% output VAT on a cost base that still includes non-deductible input VAT from the previous system.

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On concerns about the increased VAT registration threshold, now set at GH¢750,000, the Authority dismissed suggestions of market distortion. It explained that non-registered traders still pay VAT on purchases but cannot reclaim it, while registered traders operate on a lower cost base and remit only the net VAT difference.

“The threshold has always been a feature of Ghana's VAT system. Its increase to GH$750,000 is a deliberate relief measure to free smaller traders from the administrative burden of VAT registration and filing. It does not create a meaningful competitive distortion.” the statement noted.

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The GRA highlighted additional benefits, including a reduction in the overall effective tax rate from 21.9% to 20%, the abolition of the 1% COVID-19 Health Recovery Levy, full deductibility of input VAT, and the elimination of cascading taxes.

Reaffirming its position, the Authority stressed that “the new VAT regime, when properly applied, does not increase prices for consumers and does not distort competition in the marketplace.”

It disclosed that a joint technical team has been established with the Ghana Union of Traders’ Associations to support businesses during the transition and pledged similar assistance to the Abossey Okai traders.