Nat’l Tymes News Desk
THE GHANA Revenue Authority (GRA) has rejected claims by the Abossey Okai Spare Parts Traders Association that the new Value Added Tax (VAT) regime will lead to higher prices and distort competition in the market.
In a statement issued by its Communication and Public Affairs Department, the GRA said concerns that the 20 per cent VAT introduced under the Value Added Tax Act, 2025 (Act 1151) would burden traders and consumers are based on a misunderstanding of the policy.
According to the Authority, under the previous 4 per cent Flat Rate Scheme, traders paid 21.9 per cent input VAT on purchases, which could not be deducted. This amount became part of their cost of doing business.
Under the new regime, however, traders can fully deduct the 20 per cent input VAT they pay on their purchases, effectively lowering their cost base.
Using an illustration of a product with a base price of GH¢500 and a 20 per cent profit margin, the GRA explained that under the old system the final selling price to the customer would be GH¢760.66. Under the new system, the same product would sell at GH¢720 — a difference of GH¢40.66 in favour of the new regime.
“The appearance of higher prices is the result of traders applying the 20 per cent output VAT on a cost base that still includes non-deductible input VAT,” the Authority stated. The GRA emphasised that under the new system, VAT-registered traders are required to declare both input VAT paid on purchases and output VAT charged on sales, and remit only the difference.
The Authority also addressed concerns that increasing the VAT registration threshold to GH¢750,000 would create unfair competition. It explained that non-registered traders still pay VAT on purchases but cannot claim it back, meaning VAT remains embedded in their costs. Registered traders, on the other hand, recover their input VAT and price their goods accordingly.
Using the same GH¢500 example, the GRA said both registered and non-registered traders would sell the product at GH¢720 when applying a 20 per cent profit margin, indicating no competitive distortion. The increase in the registration threshold, the Authority noted, is intended to relieve small businesses of the administrative burden associated with VAT registration and filing.
Among the benefits of the new VAT regime, the GRA listed a reduction in the effective tax rate from 21.9 per cent to 20 per cent, the removal of the one per cent COVID-19 Health Recovery Levy, full deductibility of input VAT including NHIL and GETFund levies, elimination of the tax-on-tax effect, and a simplified and unified VAT structure.
The Authority disclosed that it has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to assist businesses with record-keeping, input tax claims and correct pricing during the transition period.
The GRA reiterated that when properly applied, the new VAT regime does not increase consumer prices and does not distort competition in the marketplace. It called on stakeholders to engage constructively and take advantage of the benefits of the reform.
Source: NationalTymes.com
