The Ghana Revenue Authority (GRA) has responded to concerns raised by the Abossey Okai Spare Parts Traders Association over the new Value Added Tax (VAT) regime, insisting the reforms will not lead to higher prices when properly applied.
This following threats by the Abossey Okai traders to embark on a strike, arguing that the implementation of the Value Added Tax Act, 2025 (Act 1151) will increase consumer prices, distort competition, and impose an unfair burden on spare parts dealers.
But the GRA, in a statement, dated Monday, February 10, 2026, explained that the claims reflect “a fundamental misunderstanding of how the new VAT system operates,” stressing that the shift from the 4% flat rate scheme to a standard VAT system with an effective 20% rate should rather reduce costs for traders.
“The change from the 4% Flat Rate to 20% will not result in increased prices,” the Authority stated, explaining that under the old flat rate regime, traders paid input VAT of 21.9% on every purchase and could not deduct it, making it part of their business cost.
Under the new system, input VAT of 20% is fully deductible, allowing traders to claim it back and price goods based on a lower cost base.
To demonstrate this, the GRA cited an example using a GH¢500 base price with a 20% profit margin, noting that the final price to the customer 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 (GH¢720) is GH¢40.66 lower than under the old regime (GH¢760.66),” it said.
The Authority maintained that any price increases currently being recorded in the market are not the result of the new policy but rather a pricing error by traders who are applying the 20% output VAT on top of costs that still include input VAT.
“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 GRA said.
The GRA also dismissed concerns that the increased VAT registration threshold—now GH¢750,000—will create market distortions.
It explained that non-registered traders still pay VAT on purchases but cannot claim it back, meaning VAT becomes permanently embedded in their cost, while registered traders recover input VAT and remit only the net difference between what they charge and what they paid.
“The final price to the customer is identical,” the Authority said, adding that the threshold increase is a deliberate relief measure aimed at reducing the administrative burden on smaller traders.
GRA further pointed to additional benefits under Act 1151, including the permanent abolition of the 1% COVID-19 Health Recovery Levy, which it said reduces costs for both businesses and consumers.
“The 1% COVID-19 has been permanently removed, reducing the cost burden on both businesses and consumers,” the statement added.
It said a joint technical team has already been set up with the Ghana Union of Traders Associations (GUTA) to support businesses through the transition, and the Authority is ready to extend similar assistance to the Abossey Okai Spare Parts Traders Association and other trade groups.
GRA reiterated that the new VAT regime does not increase consumer prices and that observed market hikes are due to transitional pricing mistakes, not the policy itself.
