The Ghana Revenue Authority (GRA) has clarified that it does not intend to introduce any new or additional taxes on electricity that power sector firms sell to the Electricity Company of Ghana (ECG).
The GRA also stated that it has withdrawn the letter dated 4th May 2020 directing all electricity and power-producing companies to apply the GETFund Levy of 2.5%, NHIL 2.5% and VAT rate of 12.5% on the value of the energy they supply the Electricity Company of Ghana (ECG).
Earlier this month, a letter from the GRA announced the directives, indicating that the services will no longer be zero-rated.
This was followed by calls from stakeholders within the power sector demanding the withdrawal of the directive from GRA.
But the Authority in a statement explained that “the purpose of the said letter was to draw the attention of power producers in particular, to the VAT mechanism as it applies to the power sector and to get operators to invoice the supply of power to the ECG correctly.”
It also stated that “on account of their current invoicing policy, ECG over the years has had some challenges claiming input VAT associated with the supply of electricity by power producers, which could have reduced the net tax payable by ECG to GRA.”
It further explained that, the supply of electricity to a ‘dwelling’ of up to a maximum consumption level specified for block charges for lifeline units is still exempt from VAT, NHIL and GETFund levy and the Electricity Company of Ghana (ECG) already charges VAT, NHIL, and GETFund levy on the supply electricity in excess of lifeline units.
However, the Ghana Revenue Authority states that it is scheduling a meeting with power producers to address the application of the VAT mechanism to the power sector.
GRA directive
Earlier this month, the GRA issued a directive after sighting a notice dated March 13, 2001, which waives VAT on electricity supplied to ECG.
The GRA said the agreement was contrary to the Value Added Tax, 2013 (Act 870) which did not list supply of energy and capacity charge as one of the items that should be zero-rated.
Instruct ECG to stop charging VAT on power – Chamber of Independent Power Producers to GRA
The Chamber of Independent Power Producers later asked the Ghana Revenue Authority (GRA) to direct the Electricity Company of Ghana (GRA) to desist from charging VAT, GETfund and NHIL levies on electricity.
The Chamber, in a statement, asked for an official communication on the withdrawal.
“Further to GRA’s denials as published on www.ghanaweb.com of Friday, 16th May, 2020, we would like to call on the Ghana Revenue Authority to formally circulate a letter to the concerned stakeholders in the power sector withdrawing their earlier directive and direct the Electricity Company of Ghana to specifically desist from charging Ghanaians those taxes with immediate effect.”