Not only will the new Value Added Tax (VAT) reforms implemented this year simplify computation, but Ghanaians are in for significant savings at the counter.
Consumers have already started experiencing the relief at shops and malls that have already begun implementing the new reforms.
The Ghana Revenue Authority (GRA) says that at the heart of the reform is the quest to make VAT easy to calculate by all, remove the cascading effect, which simply means removing the challenge of paying tax on tax, as the old system was bedeviled.
For now, the new system can be said to be clear and fair, without hidden layers of taxes being taxed again.
To understand the new system, the old system must be explained so that consumers will appreciate the reset in the new VAT computation.
How the Old System Worked
Under the old system, several levies were first added to the price of an item before VAT itself was applied. This meant consumers ended up paying tax on top of tax, even though many did not realise it.
For example, if a television costs GHS 1,000, NHIL, GETFund, and COVID-19 levies totaling GHS 60 were added first
After the GHS 60 levy is added, a VAT of 15% was then charged on GHS 1,060, not the original price. This, in effect, pushed the final price to GHS 1,219.
In simple terms, buyers were unknowingly paying VAT on levies as well.
How the New VAT System Works
The new reform seeks to remove this hidden layering and give money back to the consumer. How is how it now works;
VAT is now calculated only on the original price of the item, and other levies are added separately and clearly
Using the same GHS 1,000 TV:
A VAT of 15% will amount to GHS 150
NHIL of 2.5% will amount to GHS 25
The GETFund levy of 2.5% will also amount to GHS 25
The final cost of the TV on the shelf after adding the above becomes GHS 1,200, not GHS 1,219. That is an instant saving of GHS 19 on a single purchase.
How Consumers Can Calculate the New VAT Themselves
One of the biggest benefits of the reform is that anyone can now calculate VAT easily, even without a calculator.
Here are the simple steps to follow in computing the new prices on your own;
Take the original price of the item
First, calculate 15% VAT on the original price
Second, calculate 2.5% NHIL on the original price
Thirdly, calculate another 2.5% GETFund levy on the original price of the item
Fourthly, add all the taxes and levies calculated (i.e the 15%VAT + 2.5%NHIL+2.5%GETFund)
Finally, add the total of the tax and levies to the original price, and that’s it. No hidden steps. No confusing calculations.
This means that after going through these steps, and a seller’s final price looks much higher, you can now ask questions.
The Impact
The savings, on the face value, may look small on one item, but they add up quickly. For households buying appliances, electronics, furniture, or other high-value goods, the new system puts more money back into consumers’ pockets.
That’s the savings increase proportionally to the quantity of items bought.
On average, consumers will now save about 1.5% to 2% of the final price of many “VATable” goods compared to the old method. Over time, this could mean hundreds of cedis saved each year for families and small businesses.
The Bottomline
Beyond savings, the reform improves fairness and transparency. Consumers can clearly see what they are paying for, while businesses apply a uniform and simple method.
In everyday terms, the new VAT system is about clarity, honesty, and relief. Ghanaians can now shop with more confidence, knowing they are no longer paying tax on tax, and that they can check the numbers themselves.
