The Ghana Revenue Authority (GRA) has dismissed claims by the Abossey Okai Spare Parts Traders Association that the new Value Added Tax (VAT) regime will trigger price increases, insisting the system is designed to reduce costs when applied correctly.
The response, issued on February 10, 2026, comes after the association threatened strike action over the implementation of the Value Added Tax Act, 2025 (Act 1151), which took effect on January 1, 2026.
In its statement, the GRA said the concerns being circulated by the traders reflect “a fundamental misunderstanding of how the new VAT system operates,” stressing that the shift from the 4% flat rate scheme to the standard VAT structure will not raise the final price paid by customers.
“The change from the 4% Flat Rate to 20% will not result in increased prices,” the Authority stated.
The GRA explained that under the old flat rate system, traders paid 21.9% input VAT on purchases but could not deduct it, making it part of their cost. Under the new regime, the 20% input VAT is fully deductible, allowing traders to claim it back and price goods from a lower cost base.
Using a GH¢500 example, the Authority said the final consumer price under the new system should be GH¢720, compared to GH¢760.66 under the previous flat rate arrangement.
“When input VAT deductibility is properly accounted for, the customer’s final price under the new regime (GH¢720) is GH¢40.66 lower than under the old regime (GH¢760.66),” it said.
The GRA argued that any price hikes currently being recorded are due to incorrect pricing practices by some traders, not the policy itself.
“The appearance of higher prices is the result of traders applying the new 20% output VAT on top of a cost base that still includes non-deductible input VAT,” it added.
The Authority also defended the decision to raise the VAT registration threshold to GH¢750,000, describing it as a relief measure to reduce the administrative burden on smaller businesses.
It maintained that the change does not distort competition, noting that non-registered traders still pay VAT on purchases but cannot claim it back, while registered traders recover input VAT and remit only the net amount.
The GRA further cited the permanent abolition of the 1% COVID-19 Health Recovery Levy as part of the cost reductions under Act 1151.
“The 1% COVID-19 has been permanently removed, reducing the cost burden on both businesses and consumers,” the statement said.
It added that a joint technical team has already been formed with the Ghana Union of Traders Associations (GUTA) to guide businesses through the transition, and the Authority is ready to engage the Abossey Okai association to address any outstanding concerns.
Source: Starrfm.com.gh
