The recently implemented Value Added Tax (VAT) system, according to the Ghana Revenue Authority (GRA), won’t result in unfair competition or higher pricing in the spare parts sector.
It follows the Abossey Okai Spare Parts Dealers Association’s threat of a one-week strike in the event that the government does not immediately examine the VAT system in accordance with the Value Added Tax Act, 2025 (Act 1151).
Pricing, competition, and compliance in the spare parts industry are being negatively impacted by the current 20% VAT rate, according to the Association.
On Tuesday, February 10, however, the GRA issued a statement claiming that the worries stemmed from a misinterpretation of the new VAT system’s operation.
The Authority clarified that although while the VAT rate has changed from a flat rate of 4% to a standard rate of 20%, traders are now able to recoup the entire amount of VAT they paid on their purchases, which was not possible under the previous system.
The GRA claims that when properly implemented, this input VAT deduction reduces traders’ actual expenses and may even lead to lower final pricing for consumers.
Additionally, the Authority denied arguments that the increased VAT registration barrier of GH¢750,000 will stifle competition, stating that registered enterprises have lower cost bases and small traders are freed from administrative hassles.
The GRA further stated that the new regime makes it easier for enterprises to comply with VAT, does away with “tax-on-tax” levies, and removes the COVID-19 levy.
It said that recent price rises are probably the result of what it called “transitional pricing errors,” in which dealers continue to compute prices using the outdated method rather than subtracting reclaimable VAT.
The Ghana Union of Traders’ Associations and the GRA have established a combined technical team to assist enterprises with adjustment, and the GRA is prepared to provide Abossey Okai dealers with the same assistance.
It urged traders to participate positively and reap the rewards of the reform.
Source: newsthemegh.com