New VAT regime will not increase consumer prices — GRA

The Ghana Revenue Authority (GRA) has pushed back against concerns that the new Value Added Tax (VAT) regime will lead to higher consumer prices and distort market competition, particularly among spare parts dealers.

In a press statement issued on Tuesday, February 10, 2026, the Authority responded to claims by the Abossey Okai Spare Parts Traders Association that the new VAT framework under the Value Added Tax Act, 2025 (Act 1151) imposes an unfair burden on traders and could drive up prices.

The GRA described the concerns as a “fundamental misunderstanding” of how the revised system operates.

Under the previous 4% flat rate scheme, traders paid 21.9% input VAT on purchases, which was non-deductible and therefore embedded in their cost structure.

Under the new regime, the standard VAT rate is 20%, and input VAT is fully deductible. According to the GRA, this reduces the effective cost base for traders.

Using an illustrative example of a GH¢500 product with a 20% profit margin, the Authority showed that:
• Under the old system, the final consumer price would be GH¢760.66.
• Under the new system, the final price would be GH¢720.

The GRA argued that once input VAT deductibility is properly applied, the new regime actually results in lower final prices.

“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,” the statement said.

Under the new structure, businesses declare input and output VAT in the same return and remit only the difference.

VAT Threshold Increase

The Authority also rejected claims that raising the VAT registration threshold to GH¢750,000 would distort competition.

According to the GRA, non-registered traders still pay 20% VAT on purchases but cannot claim deductions. Registered traders, however, recover input VAT and price their goods from a lower cost base.

Using the same GH¢500 example, both registered and non-registered traders would ultimately sell at GH¢720, the GRA explained, arguing that the threshold increase is a relief measure to reduce administrative burdens on small businesses.

Key Features of the New VAT Regime

The GRA outlined several benefits under the new system:
• Reduction in the overall effective tax rate from 21.9% to 20%.
• Abolition of the 1% COVID-19 Health Recovery Levy.
• Full deductibility of input VAT, including NHIL and GETFund levies.
• Elimination of cascading “tax-on-tax” effects.
• Lower cost of doing business due to removal of embedded VAT in cost structures.
• A simplified and unified VAT system.
• Higher registration threshold to ease compliance for small traders.

According to the Authority, a trader’s cost on a GH¢500 item falls from GH¢609.50 under the old regime to GH¢500 under the new system — a reduction of nearly 18%.

Transitional Pricing Errors

The GRA maintains that price increases currently being observed are due to transitional pricing errors, not the policy itself.

“The price increases currently being observed are the result of a failure to remove now-deductible input VAT from cost calculations,” the Authority stated.

To support businesses during the transition, the GRA has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to provide guidance on VAT record-keeping, input tax claims, and correct pricing structures. The Authority said it is prepared to extend similar support to the Abossey Okai traders and other groups.

The new VAT regime forms part of broader tax reforms aimed at simplifying compliance, improving transparency, and reducing embedded costs within Ghana’s tax system.