New VAT Law to Lower Effective Tax Burden for Consumers – GRA
Recent reforms under Ghana’s new Value Added Tax (VAT) law will result in a lower effective VAT burden for taxpayers, despite widespread public concerns about a possible increase in taxes, the Ghana Revenue Authority (GRA) has clarified.
Dr Martin Kolbil Yamborigya, Commissioner for the Domestic Tax Revenue Division at the GRA, said the revised VAT structure corrects distortions in the previous system by decoupling the tax base used in calculating VAT and related levies.
Speaking in an interview, Dr Kolbil explained that under the old regime, the VAT rate of 15 per cent was applied on a base that already included the GETFund Levy and the National Health Insurance Levy (NHIL), each charged at 2.5 per cent. This, he said, resulted in a higher effective VAT rate for consumers and businesses.
“What it means is that before you apply the VAT rate of 15 per cent, you had to include the GETFund of 2.5 per cent and the National Health Insurance Levy of 2.5 per cent. That gave a higher effective VAT rate,” he said. “But we have brought it back to where it was before.”
Under the new structure, VAT, the GETFund Levy and the NHIL will all be calculated on the same taxable base, rather than being layered on top of each other. Dr Kolbil illustrated this with an example, noting that if the taxable value of a good or service is GH¢100, all three charges — 15 per cent VAT, 2.5 per cent GETFund Levy and 2.5 per cent NHIL — will now be computed directly on the GH¢100.
“So what it implies is that the effective VAT rate will be lower than what it used to be. Taxpayers ordinarily will be paying less than what they previously paid,” he stated.
The clarification follows a public notice issued by the GRA announcing that the Value Added Tax Act, 2025 (Act 1151), will officially take effect from January 1, 2026. According to the Authority, the deferred implementation is intended to give businesses and taxpayers sufficient time to reconfigure their systems and prepare for the changes.
The GRA said the new VAT law introduces comprehensive reforms aimed at simplifying VAT administration, improving efficiency and enhancing voluntary compliance across the economy.
Among the key changes is an upward revision of the VAT registration threshold for businesses dealing in goods, which has been increased from GH¢200,000 to GH¢750,000. The Authority said the adjustment is designed to ease the compliance burden on small businesses, while allowing tax authorities to concentrate enforcement and monitoring efforts on larger taxpayers.
The GRA has therefore urged VAT-registered businesses and the general public to familiarise themselves with the reforms and begin aligning their accounting and billing systems ahead of the January 2026 rollout, noting that the new law will significantly alter how VAT is charged, reported and credited in Ghana.
