The Ghana Revenue Authority (GRA) has moved to dispel fears of price hikes in the spare parts market, asserting that the new 2025 VAT regime (Act 1151) actually makes goods cheaper for the final consumer when applied correctly.
The response comes after the Abossey Okai Spare Parts Traders Association raised alarms that moving from a 4% “Flat Rate” to a 20% “Standard Rate” would burden traders and lead to expensive car parts.
1. The Math: Why Prices Should Fall
The GRA explained that under the old 4% Flat Rate, traders were paying a “hidden” tax of 21.9% on their purchases which they could not get back. Under the new system, while the rate on the receipt looks higher (20%), traders can now claim back every cedi of tax they pay on their stock (Input VAT).
To prove this, the GRA provided a breakdown based on a GH¢500 item:
The Verdict: The GRA says any price increases seen now are likely “pricing errors” by traders who are forgetting to remove the old hidden taxes from their costs before adding the new VAT.
2. Is there a “Market Distortion”?
Traders feared that small shops (who don’t register for VAT) would have an unfair advantage over big shops. The GRA debunked this, showing that because big shops can claim their tax back while small shops cannot, the final price to the customer ends up being identical (GH¢720 in the example above).
The new threshold of GH¢750,000 annual turnover is simply meant to relieve small businesses from the “paperwork” of filing taxes, not to change market prices.
3. Key Benefits for Businesses
Beyond lower prices, the GRA highlighted several wins for the Ghanaian business community:
- Goodbye COVID Levy: The 1% COVID-19 Health Recovery Levy has been permanently abolished.
- No “Tax on Tax”: The old system used to charge levies on top of other levies. The new system is “flat” and transparent.
- 18% Cost Reduction: For a typical trader, the actual cost of holding stock drops significantly because the VAT is no longer an “expense” but a refundable deposit.
4. Next Steps for Traders
The GRA admitted that this is a major transition. They have already formed a technical team with the Ghana Union of Traders’ Associations (GUTA) to help shop owners understand how to:
- Keep proper records.
- File for their tax refunds (Input VAT).
- Set the correct, lower prices for customers.
The Authority invited the Abossey Okai leadership to the table, urging them to embrace the “Data Coast” era of transparent and digital-friendly taxation.
