GRA Defends New VAT Regime Amid Concerns from Spare Parts Traders

GRA Defends New VAT Regime Amid Concerns from Spare Parts Traders

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 (VAT) regime, insisting that the policy will not lead to higher consumer prices or unfair market competition.

In a press release dated February 10, 2026, the Authority said claims that the new VAT system under the Value Added Tax Act, 2025 (Act 1151) would increase prices reflect a misunderstanding of how the tax structure operates. 

According to the GRA, the shift from the 4 percent flat rate scheme to the 20 percent standard VAT will, in practice, reduce costs for traders because businesses can now fully deduct input VAT paid on purchases. Under the previous regime, traders paid input VAT of 21.9 percent, which could not be claimed back, leading to higher operational costs. 

Using a hypothetical example of a GH¢500 base price with a 20 percent profit margin, the GRA explained that the new regime results in a lower final selling price of GH¢720 compared to GH¢760.66 under the old system.

The Authority noted that perceived price increases arise when traders mistakenly add the new 20 percent VAT on top of costs that still include non-deductible input VAT. 

The GRA also dismissed concerns that raising the VAT registration threshold to GH¢750,000 would create market distortions.

The GRA  explained that while unregistered traders pay VAT on purchases without reclaiming it, registered businesses can recover input VAT, allowing both groups to maintain similar final pricing structures for consumers. 

Highlighting the benefits of the new VAT regime, the Authority said the reforms have lowered the effective tax rate from 21.9 percent to 20 percent and permanently abolished the 1 percent COVID-19 Health Recovery Levy.

The GRA added that the new system eliminates cascading taxes, reduces the cost of doing business, and simplifies compliance through a unified VAT structure. 

Additionally, the Authority stated that smaller businesses with annual turnover below GH¢750,000 are now exempt from VAT registration, reducing administrative burdens on micro and small-scale enterprises. 

The GRA disclosed that it has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to help businesses transition smoothly into the new VAT framework.

The team is expected to provide guidance on record-keeping, input tax claims, and pricing structures. 

The Authority urged stakeholders, including the Abossey Okai Spare Parts Traders Association, to engage constructively and take advantage of the support available, reiterating that the policy, when properly applied, is designed to reduce costs rather than increase them.