The AbosseyOkai Spare Parts Dealers Association has appealed to the government to reduce the 20 per cent Value Added Tax (VAT) imposed on spare parts to about five to eight per cent.
According to the Association, the new tax regime which has been increased from four per cent to 20 per cent could collapse the businesses of its members and significantly increase the cost of spare parts to consumers.
The Communications Officer of the Association, MrTakyieAddo, said in a press statement issued in Accra yesterday warned that the Association would embark on a one week strike if the current VAT hike was not reduced.
He lamented that the 20 per cent VAT would severely affect the operations of spare parts dealers.
The Communications Officer explained that the tax increase would lead to sharp price hikes, making spare parts unaffordable for many consumers and adversely affecting the transport sector.
MrAddo cited an example where a spare part that sold for GH¢520 under the four per cent VAT regime would now sell for GH¢600 under the current tax structure.
He said the Association was concerned about the practical impact of the newly implemented VAT regime under the Value Added Tax Act, 2025 (Act 1151), particularly regarding fairness, competitiveness and voluntary compliance within the spare parts sector.
He noted that under the previous arrangement, dealers operated under a lower effective VAT framework, which allowed prices to remain relatively competitive while maintaining compliance.
He explained that the increase to an effective 20 per cent VAT had significantly altered market dynamics, placing an additional burden of GH¢80 on consumers for the same product.
According to him, the situation was worsening the cost of doing business in an already highly competitive and low-margin sector.
MrAddo said the Association was worried about what it described as unequal treatment among dealers.
MrAddo explained that while some dealers import spare parts directly and could claim import VAT credits, others source goods locally from importers and were unable to claim input VAT.
He said despite this, VAT-registered dealers sourcing locally were still required to charge the full 20 per cent VAT at the point of sale.
MrAddo pointed out that that had created a structural imbalance, where VAT-registered dealers were forced to sell at higher prices than non-registered dealers whose annual turnover falls below the GH¢750,000 VAT registration threshold.
That, he said, unfairly penalised compliant and growing businesses while encouraging fragmentation and informality.
The Association warned that the current VAT structure could lead to reduced compliance, discourage business expansion and shift customers towards non-VAT-charging sellers.
It stressed that while it supported government’s efforts to broaden the tax base, the current VAT rate was excessively high for the spare parts trade.
The Association, therefore, proposed a reduced VAT rate of between five and eight per cent for spare parts dealers or the introduction of a simplified, sector-specific VAT scheme at a flat rate of about three per cent to ensure fairness, competitiveness and sustainability in the sector.
BY KINGSLEY ASARE
