By Adnan Adams Mohammed
The Ghana Revenue Authority (GRA) has moved to clear the air regarding the new Value Added Tax (VAT) regime under the Value Added Tax Act, 2025 (Act 1151), following concerns raised by the Abossey Okai Spare Parts Traders Association.
The Authority maintains that the transition from the 4% Flat Rate to a 20% Standard Rate will actually lower consumer prices and reduce the cost of doing business when applied correctly.
In a press statement released February 10, 2026, the GRA addressed claims that the new 20% rate would burden traders and consumers. According to the Authority, the previous Flat Rate system included a 21.9% non-deductible input VAT, which traders had to absorb into their costs.
Under the new 2025 regime:
Full Deductibility: The 20% input VAT is now fully deductible, allowing traders to claim it back from the GRA.
Lower Final Prices: In a comparative illustration of a GH¢500 item, the GRA showed that the final price to the customer drops from GH¢760.66 under the old system to GH¢720.00 under the new regime—a savings of GH¢40.66.
Removal of “Tax-on-Tax”: The new system eliminates “cascading taxes” where levies were previously charged on top of other levies.
The GRA attributed current price increases to a “transitional pricing error,” where traders are applying the new 20% output VAT without removing the now-deductible input VAT from their cost calculations.
Market Fairness and the New Threshold
The GRA also defended the decision to increase the VAT registration threshold to GH¢750,000. While some feared this would distort market competition, the Authority provided data showing that both registered and non-registered traders can achieve the same final customer price (GH¢720 for a GH¢500 item).
The increased threshold is intended to provide administrative relief to smaller traders, freeing them from the burden of VAT filing without giving them an unfair pricing advantage.
Key Benefits to Businesses
The Authority highlighted several structural improvements designed to streamline trade:
Abolition of the COVID-19 Levy: The 1% COVID-19 Health Recovery Levy has been permanently removed.
Unified Structure: The removal of the flat rate scheme creates a single, transparent system for all registered taxpayers.
Effective Rate Reduction: The overall effective tax rate has decreased from 21.9% to 20%, representing a 1.9% saving on every transaction.
Support for Traders
To assist with the transition, the GRA has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA). This team provides guidance on record-keeping, input tax claims, and correct pricing strategies.
The GRA has extended an invitation to the Abossey Okai Spare Parts Traders Association to engage in similar constructive support to ensure their members can take full advantage of the new policy.
