Abossey Okai spare parts dealers threaten strike over new VAT rate

The Abossey Okai Spare Parts Dealers Association has announced plans for a potential one-week strike unless the government reviews the newly implemented 20% Value Added Tax (VAT) on their goods.

In a press statement issued on Saturday, the Association warned that the tax hike, enacted under the Value Added Tax Act, 2025 (Act 1151), is crippling their businesses, inflating prices for consumers, and creating an unfair competitive landscape.

The group highlighted the sharp increase from the previous sector-specific rate of 4%. They explained that an item previously sold for GH¢500, with GH¢20 VAT, now attracts GH¢100 in tax, raising the final price to GH¢600. This, they argue, places an unbearable additional burden on consumers amid a high cost of living.

Takyi Addo, the Association’s Head of Communications, stated, “The new VAT rate is significantly affecting our operations and making it difficult for dealers to remain competitive.” The statement further cautioned that the policy risks pushing formal businesses into informality.

A major concern raised is the disparity created by the new threshold. Businesses with an annual turnover above GH¢750,000 must register for VAT and charge 20%, while smaller operators are exempt. The Association argues this penalises compliant, growing businesses, as both large and small dealers source from the same importers.

“This imbalance penalises growth, efficiency, and compliance, while unintentionally rewarding fragmentation and informality,” the statement noted.

The dealers also cited an inability to claim input VAT on some locally sourced products, which further increases their costs and selling prices.

While expressing support for broader government revenue efforts, the Association proposed solutions including reducing the VAT on spare parts to between 5% and 8%, or introducing a simplified, flat-rate scheme of 3% for the sector.

“We respectfully request a review of the VAT rate and structure as applied to the spare parts sector and remain open to further engagement on this matter,” the statement concluded.

The group has set no specific deadline for the government’s response but indicated the one-week strike is imminent if their concerns are not urgently addressed.