Abossey Okai spare parts dealers demand VAT review

The Abossey Okai Spare Parts Dealers Association has urged government to review the newly implemented Value Added Tax (VAT) regime under the Value Added Tax Act, 2025 (Act 1151), warning that the policy is undermining competitiveness, distorting prices, and weakening compliance in the spare parts trade. The Association cautioned that it may embark on a one-week strike if authorities fail to address concerns over the effective VAT rate, which has risen from about 4% under the previous arrangement to 20%.

In a press statement issued on February 8, 2026 and signed by its Head of Communications, Takyi Addo, the group said the sharp increase has significantly altered pricing dynamics and placed a heavy burden on both traders and consumers. To illustrate the impact, the Association explained that an item previously sold at GH¢500 attracted GH¢20 in VAT, bringing the total price to GH¢520.

Under the current regime, the same item now attracts GH¢100 in VAT, raising the final price to GH¢600, an additional GH¢80 cost to consumers for the same product. According to the dealers, this steep increase is driving customers toward informal sellers who do not charge VAT, thereby undermining compliant businesses and reducing overall tax collection.

Give the power back to farmers - Franklin Cudjoe to COCOBOD. The Association also raised concerns about unequal treatment among dealers sourcing goods locally from the same importers. It noted that while some traders are required to register for VAT and charge 20% due to higher annual turnover, others below the GH¢750,000 threshold are exempt, allowing them to sell the same products without VAT.

“A VAT-registered dealer who buys locally cannot claim input VAT but is still required to add 20% at the point of sale, making his products more expensive than those of a non-registered competitor,” the statement said. “This discourages growth, efficiency and compliance, while unintentionally rewarding informality,” it added.

The group warned that the current system incentivises businesses to remain below the VAT registration threshold, discourages formalisation and expansion, and reduces overall compliance within the sector. While expressing support for government’s efforts to broaden the tax base and strengthen revenue mobilisation, the Association argued that the 20% rate is too high for the spare parts trade, which typically operates on thin profit margins.

As a solution, the dealers proposed either a reduced VAT rate of between 5% and 8% for spare parts businesses or the introduction of a sector-specific simplified VAT scheme with a flat rate of about 3%, applied uniformly regardless of whether goods are imported directly or sourced locally. They believe such measures would restore fairness, encourage voluntary compliance, protect jobs, and ultimately increase government revenue by reducing tax leakages.

The Association said it remains open to dialogue with authorities but cautioned that failure to review the VAT structure could trigger a one-week industrial action. Understanding Ghana's stock market and how to invest | BizTech

Source: GhanaWeb