The Ghana Revenue Authority (GRA) has dismissed fears that the newly implemented Value Added Tax (VAT) regime will lead to an increase in spare parts prices or create unfair competition within the sector.
The clarification follows threats by the Abossey Okai Spare Parts Dealers Association to embark on a one-week strike if government does not urgently review aspects of the Value Added Tax Act, 2025 (Act 1151). The Association argues that the current 20% VAT rate is negatively affecting pricing, competitiveness and compliance among dealers.
However, in a statement issued on Tuesday, February 10, the GRA described the concerns as a misunderstanding of the structure and benefits of the new VAT system.
According to the Authority, although the VAT rate has moved from a 4% flat rate to the standard 20%, traders are now permitted to claim full input VAT on their purchases a benefit that was not available under the previous flat rate system.
The GRA explained that the ability to deduct input VAT significantly reduces the actual tax burden on registered businesses and, when properly applied, could even lead to lower final prices for consumers.
The Authority also rejected claims that the new VAT registration threshold of GH¢750,000 would distort market competition. It stated that the threshold is intended to ease administrative pressures on smaller traders, while registered businesses benefit from a lower effective cost base through VAT deductions.
Additionally, the GRA highlighted that the revised VAT framework removes the COVID-19 levy, eliminates “tax-on-tax” components, and streamlines compliance procedures.
Addressing recent price hikes in the spare parts market, the Authority suggested that these may stem from “transitional pricing errors,” where some traders are still calculating prices under the old flat rate system without factoring in reclaimable VAT.
The GRA further revealed that it has established a joint technical team with the Ghana Union of Traders’ Associations (GUTA) to assist businesses in adapting to the changes. It expressed readiness to extend similar support to members of the Abossey Okai Association.
The Authority urged stakeholders to engage constructively and take full advantage of the reforms, which it maintains are designed to promote transparency, fairness and efficiency in the tax system.
Source:NKONKONSA.com
