Covid-19 levy: Prices of goods and services will go up on Monday -Importers & Exporters warn



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With the Ghana Revenue Authority poised to implement the 1% COVID-19 Health Recovery Levy on Monday , 1st of May, 2021, the Importers and Exporters Association of Ghana, is urging Ghanaians to embrace themselves for possible increment in prices of goods and services.

With the imposition of the Covid-19 Health Recovery, which will see the standard VAT rate adjusting upwardly to 19.25% from it previous rate of 18.125%, consumers must be made aware that such increment will be applicable to goods imported or exported in and out of the country.

The Association in a statement signed by it Executive Secretary Samson Asaki Awingobit, said the new levy which according to government will help raising revenue to support COVID-19 expenditure, will also be an addition to existing sales taxes, hence the need for consumers to be made aware of the increase in the price of goods and services.

HOW DOES THIS CHANGE THE STRUCTURE OF SALES TAXES

Currently the VAT standard rate without the soon to be introduced COVID-19 levy stands as;
GETFUND- 2.5%
NHIL- 2.5%
VAT- 12.5%

This means with the old tax system whereby a 1,000ghc product was sold or valued at 1,181.2ghc with tax inclusive, the additional 1% COVID-19 levy will see same product being sold or valued at 1,192.5ghc

Here’s a breakdown of the old and new system;.

Old system:
Product Gross Cost – GHS1,000
NHIL (2.5%1,000) – GHS25 GETFUND (2.5%1,000) – GHS25
Sub-total (1,000+25+25) – GHS1,050
VAT (12.5%*1,050) – GHS131.25
Total price to customer (1,050 + 131.25) – GHS1,181.20

New system:
Product Gross Cost – GHS1,000
NHIL (2.5%1,000) – GHS25 GETFUND (2.5%1,000) – GHS25
COVID-19 Levy (1% 1,000) – GHS10 Sub-total (1,000+25+25+10) – GHS1,060 VAT (12.5%1,060) – GHS132.50
Total price to customer (1,060 + 132.50) – GHS1,192.5

This means that the new effective compound standard VAT rate is 19.25% (192.5/1,000100), which is 1.125% more than the old effective rate of 18.125% (118.25/1,000100).

Based on this, the Importers and Exporters Association of Ghana want Ghanaians to expect marginal increment in goods imported into the country by it members, which will be transferred to the buyer.

The Association also in the statement commended suggestion by a former finance minister, Seth Tekper, for government to scrap the said 1% COVID-19 levy in the future, when it manages to recoup monies expended during the pandemic.

It, however, wished the said suggestion could have been implemented by the erstwhile Mahama administration of which Mr Tekper was then the Finance Minister when it introduced the special tax recovery levy.

Ghana | Atinkaonline.com | Philip Azu