GRA Rejects Claims of Price Hikes Under New VAT Regime; Says Prices Should Fall if Applied Correctly
The Ghana Revenue Authority (GRA) has rejected claims by the Abossey Okai Spare Parts Traders Association that the newly introduced Value Added Tax (VAT) regime will push up consumer prices, distort competition and unfairly burden traders.
In a statement dated February 10, 2026, the Authority said the concerns stem from a “fundamental misunderstanding” of how the VAT system under the Value Added Tax Act, 2025 (Act 1151) operates, stressing that the reforms, when properly applied, should rather lower costs and final prices.
According to the GRA, the shift from the 4 per cent VAT Flat Rate Scheme to the standard 20 per cent VAT does not translate into higher prices because input VAT is now fully deductible. Under the previous system, traders paid an effective input VAT of 21.9 per cent, which could not be reclaimed and therefore became embedded in costs.
Using an illustrative example of a GH¢500 base price and a 20 per cent profit margin, the Authority explained that the final consumer price under the new regime would be GH¢720, compared to GH¢760.66 under the old flat rate system.
“When input VAT deductibility is properly accounted for, the customer’s final price under the new regime is lower,” the statement noted.
The GRA attributed current price increases in parts of the market to a “transitional pricing error”, where traders continue to build prices on a cost base that still includes now-deductible input VAT.
Addressing concerns about competition following the increase in the VAT registration threshold to GH¢750,000, the Authority said the change does not create market distortions. It explained that non-registered traders still pay VAT on purchases without the ability to reclaim it, while registered traders recover input VAT but charge output VAT, resulting in the same final price to consumers when margins are comparable.
The Authority said the higher threshold is intended to ease the administrative burden on smaller traders rather than confer competitive advantage.
The GRA also highlighted several benefits of the new VAT regime, including a reduction in the effective tax rate from 21.9 per cent to 20 per cent, the abolition of the 1 per cent COVID-19 Health Recovery Levy, full deductibility of input VAT including NHIL and GETFund components, and the elimination of cascading taxes.
“These changes reduce the cost base for businesses and improve transparency and compliance,” the Authority said, adding that the removal of the flat rate scheme creates a single, unified VAT structure.
The GRA disclosed that it has set up a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to support businesses during the transition, including guidance on record-keeping, input VAT claims and correct pricing. It said the same support would be extended to the Abossey Okai Spare Parts Traders Association and other trade groups.
“The new VAT regime, when properly applied, does not increase prices for consumers and does not distort competition,” the statement said, urging stakeholders to engage constructively and take advantage of the reforms.
