The Ghana Revenue Authority (GRA) has dismissed concerns that the newly introduced Value Added Tax (VAT) regime will result in higher consumer prices or create unfair competition within the retail market, insisting that the reforms are designed to reduce costs and improve transparency across the economy.
In a detailed press statement issued on Tuesday, February 10, 2026, the Authority responded to complaints raised by the Abossey Okai Spare Parts Traders Association, which had argued that the new VAT structure under the Value Added Tax Act, 2025 (Act 1151) places an excessive burden on traders and could push prices upward.
According to the GRA, these concerns stem from a misunderstanding of how the revised VAT system works, particularly the treatment of input VAT.
Under the previous VAT flat rate scheme, traders paid a 4 percent flat rate on sales but incurred 21.9 percent input VAT on purchases. This input VAT was not deductible and therefore became embedded in the cost of goods, ultimately passed on to consumers in the form of higher prices.
The Authority explained that the new VAT regime replaces the flat rate system with a standard 20 percent VAT rate, under which businesses can fully deduct input VAT. This includes deductions on the National Health Insurance Levy (NHIL) and the Ghana Education Trust Fund (GETFund) levy, which were previously embedded in costs.
According to the GRA, once deductibility is properly applied, the new system results in a lower effective tax burden and reduced final prices.
To illustrate its position, the Authority used an example of a product with a base cost of GH¢500 and a profit margin of 20 percent. Under the old flat rate system, the final consumer price would have been GH¢760.66 due to embedded non-deductible input VAT. Under the new VAT regime, however, the same product would sell at GH¢720, reflecting a lower overall cost.
“The perception of higher prices arises when traders apply the new 20 percent output VAT on top of a cost base that still includes non-deductible input VAT,” the GRA stated. “Under the new structure, businesses are required to declare both input and output VAT in the same return and remit only the net amount.”
The Authority also addressed concerns about the increase in the VAT registration threshold from its previous level to GH¢750,000. Some traders had argued that the change could distort competition by favouring larger businesses.
The GRA rejected this claim, describing the threshold adjustment as a relief measure aimed at reducing compliance costs for small businesses. It explained that non-registered traders still pay VAT on their purchases but cannot claim deductions, while registered traders recover input VAT and price their goods from a lower cost base.
Using the same GH¢500 example, the Authority said both registered and non-registered traders would ultimately sell the product at GH¢720, meaning the threshold does not create a pricing advantage but rather eases administrative pressure on smaller operators.
As part of its clarification, the GRA outlined several benefits of the new VAT regime. These include a reduction in the effective tax rate from 21.9 percent to 20 percent, the abolition of the 1 percent COVID-19 Health Recovery Levy, full input VAT deductibility, and the elimination of cascading “tax-on-tax” effects that previously inflated prices.
The Authority added that the reforms lower the overall cost of doing business by removing embedded VAT from cost structures, introduce a simplified and unified VAT system, and raise the registration threshold to improve compliance among small and medium-sized enterprises.
According to the GRA, a trader’s cost on a GH¢500 item has dropped from GH¢609.50 under the old regime to GH¢500 under the new framework, representing a reduction of nearly 18 percent.
The Authority acknowledged that some price increases have been observed since the rollout of the new system but attributed them to transitional pricing errors rather than flaws in the policy itself.
“These increases are the result of traders failing to remove now-deductible input VAT from their cost calculations,” the statement said.
To address these challenges, the GRA disclosed that it has set up a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to provide hands-on guidance on VAT record-keeping, correct pricing models, and input tax claims. The Authority said it is ready to extend similar support to the Abossey Okai Spare Parts Traders Association and other stakeholder groups.
The new VAT regime forms part of broader tax reforms aimed at simplifying compliance, enhancing fairness, and reducing hidden costs within Ghana’s tax system, with the GRA maintaining that consumers should ultimately benefit from lower, not higher, prices.
Source: Africa Publicity
