New VAT regime will not cause price hikes — GRA assures

The Ghana Revenue Authority (GRA) has allayed fears of increased consumer prices and market distortion following the implementation of the new Value Added Tax (VAT) regime.

Ghana rolled out major VAT reforms effective January 1, 2026, under the Value Added Tax Act, 2025 (Act 1151), streamlining the system to a 20 percent effective rate.

The reforms abolished the COVID-19 Health Recovery Levy and the VAT Flat Rate Scheme (VFRS), raised the registration threshold for goods to GH¢750,000, and allowed full input tax deductions for the National Health Insurance Levy (NHIL) and the GETFund Levy.

The response comes after the Abossey Okai Spare Parts Dealers Association raised concerns that the new regime would lead to higher consumer prices, distort market competition and unfairly burden spare parts traders.

In a statement dated February 10, the GRA said the claims were based on a misunderstanding of how the revised VAT system operates.

“The change from the 4% Flat Rate to 20% will not result in increased prices,” the Authority stated.

It explained that under the old flat rate scheme, traders paid 21.9 percent input VAT on purchases which was not deductible, thereby embedding the tax in their cost.

Under the new regime, the 20 percent input VAT is fully deductible, allowing traders to reclaim it and operate on a lower cost base.

Using an illustration of a GH¢500 base price with a 20 percent profit margin, the GRA said the final price to consumers under the new regime would be GH¢720, compared to GH¢760.66 under the old system.

The Authority also dismissed claims that the increased VAT registration threshold would distort competition.

It said non-registered traders still pay VAT on purchases but cannot claim input tax, while registered traders reclaim input VAT and charge output VAT, resulting in similar final prices for consumers.