The Abossey Okai Spare Parts Dealers Association has threatened to embark on a one-week strike to protest what it describes as the “excessive and unfair” impact of the newly implemented Value Added Tax (VAT) regime on the spare parts trade.
In a press statement issued on Sunday, the Association called on government to urgently review the VAT rate and structure under the Value Added Tax Act, 2025 (Act 1151), warning that the current system is distorting competition, discouraging compliance and threatening the survival of formal businesses in the sector.
According to the Association, spare parts dealers previously operated under an effective VAT rate of about 4 percent, which allowed prices to remain relatively stable while encouraging compliance. Under the new regime, however, the effective VAT charge on taxable supplies has risen to 20 percent, significantly increasing prices for consumers.
The Association cited an example where a spare part that previously sold for GH¢500 attracted GH¢20 in VAT, bringing the total price to GH¢520. Under the current system, the same item now attracts GH¢100 in VAT, pushing the final price to GH¢600 — an additional GH¢80 burden on customers.
Beyond higher prices, the Association raised concerns about what it described as unequal treatment among dealers operating in the same market. It noted that dealers who source goods locally from importers are affected differently depending on their annual turnover.
In practice, the Association explained, two dealers may buy the same spare parts from the same importer at the same cost price. However, a dealer whose turnover exceeds the GH¢750,000 VAT registration threshold is required to register and charge VAT, while another dealer below the threshold is not.
This, the Association said, creates a structural imbalance, as VAT-registered dealers who source locally are unable to claim input VAT but must still charge 20 percent VAT at the point of sale. As a result, registered dealers are forced to sell at higher prices than non-registered competitors selling identical products.
The Association warned that the situation penalizes growth and compliance while rewarding informality and business fragmentation.
It further observed that the current VAT structure has led to customers shifting toward non-VAT-charging sellers, businesses deliberately staying below the VAT registration threshold, and reduced incentives for expansion and formalization within the sector.
While acknowledging that import VAT is creditable under the new law, the Association said this relief does not benefit dealers who source locally, even though they operate within the same supply chain.
Despite its concerns, the Association said it supports government’s efforts to broaden the tax base and improve revenue mobilization. However, it argued that the current effective VAT rate is too high for the spare parts trade, which operates on thin profit margins.
The Association proposed either a reduced VAT rate of between 5 and 8 percent for spare parts dealers, or the introduction of a sector-specific simplified VAT scheme at a flat rate of about 3 percent, applied uniformly regardless of whether goods are imported directly or sourced locally.
According to the Association, such measures would restore fairness and price competitiveness, encourage voluntary compliance, protect formal businesses, and ultimately improve net revenue collection by reducing tax leakage through informality.
The Association concluded by calling on government to review the VAT rate and structure as applied to the spare parts sector, warning that compliant and growing businesses should not be disadvantaged in the process.
The statement was signed by the Association’s Head of Communications, Takyi Addo.
