Input Tax Recovery Under Ghana’s New VAT Regime: A Practical Guide for Smart Businesses

How CETECH Ghana Is Helping Businesses Navigate Act 1151 with Confidence

Introduction: A New VAT Era—and a New Opportunity for Businesses

Ghana officially entered a new phase of Value Added Tax administration on 1 January 2026 with the implementation of the Value Added Tax Act, 2025 (Act 1151). Beyond the headline changes—such as the abolition of the VAT Flat Rate Scheme (VFRS) and the removal of the COVID-19 Health Recovery Levy—the new law introduces a far more consequential shift: the full restoration of input tax recovery, including NHIL and GETFund levies.

For many businesses, VAT has historically been viewed as a cost rather than a neutral tax. Act 1151 corrects this distortion. When properly applied, the new VAT system ensures that businesses only remit tax on the value they add, not on taxes already paid at earlier stages.

At CETECH Ghana, we see this reform not merely as a compliance requirement, but as a strategic opportunity for businesses to improve cash flow, strengthen pricing structures, and professionalize their tax and accounting systems. This article explains what input tax recovery is, who benefits, and—most importantly—how businesses and qualifying individuals can claim it correctly under the new law.

Understanding the New VAT Framework Under Act 1151

Before examining input tax recovery, it is important to understand the structure of the new VAT regime.

Under Act 1151:

• The standard VAT rate remains 15%
• The National Health Insurance Levy (NHIL) remains 2.5%
• The GETFund levy remains 2.5%
• The total effective VAT rate is now 20%
• NHIL and GETFund are now fully creditable as input tax
• The VAT Flat Rate Scheme has been abolished
• The COVID-19 Health Recovery Levy has been removed
• The VAT registration threshold for businesses dealing in goods has increased from GH₵200,000 to GH₵750,000

These reforms were designed to simplify VAT administration, eliminate cascading taxes, and improve fairness across the economy—objectives that CETECH Ghana has consistently advocated for through taxpayer education and advisory support.

What Is Input Tax? A Simple Explanation for Ghanaian Businesses

Input tax refers to the VAT and related levies that a VAT-registered business pays when it purchases goods or services for business purposes.

Under the new system, input tax includes:

• 15% VAT
• 2.5% NHIL
• 2.5% GETFund levy

Common Examples of Input Tax in Practice

Input tax typically arises when a business:

• Buys goods for resale
• Purchases raw materials for manufacturing
• Pays for professional services (legal, accounting, IT, engineering)
• Imports goods through Ghana’s ports
• Pays taxable rent, utilities, or operational services

Input Tax vs Output Tax

• Input tax is what a business pays on purchases
• Output tax is what a business charges on sales

The VAT system is designed so that businesses remit to the Ghana Revenue Authority (GRA) only the difference between output tax and input tax.

What Is Input Tax Recovery—and Why It Matters Now

Input tax recovery (also called an input tax credit) is the legal right of a VAT-registered taxpayer to deduct input tax paid on business purchases from output tax collected on sales.

What makes Act 1151 particularly significant is that:

• VAT, NHIL, and GETFund are all now recoverable
• Businesses are no longer taxed on taxes
• The cascading tax effect has been eliminated

This change aligns Ghana’s VAT system with global best practices and significantly improves the neutrality of the tax.

From CETECH Ghana’s experience working with SMEs, manufacturers, importers, and service providers, this reform alone can materially improve business profitability when correctly implemented.

Who Benefits Most from Input Tax Recovery?

VAT-Registered Businesses

Retailers, wholesalers, manufacturers, contractors, and service providers benefit directly through:

• Lower effective tax costs
• Improved working capital
• Better cost control and pricing accuracy

Importers and Exporters

Import VAT and levies paid at the ports are no longer dead costs but recoverable credits, improving competitiveness and export readiness.

Growing SMEs

Businesses that have crossed the GH₵750,000 registration threshold now have stronger incentives to comply, as VAT registration comes with tangible financial benefits.

Finance Professionals and Compliance Teams

The new system rewards accurate bookkeeping, strengthening the role of accountants, finance managers, and tax consultants.

Consumers

When businesses are not forced to embed unrecoverable taxes into prices, consumers benefit indirectly through reduced price pressure.

Step-by-Step Guide: How to Recover Input Tax Correctly in Ghana

At CETECH Ghana, we emphasize that input tax recovery is a process, not an assumption. Below is a practical guide every VAT-registered business should follow.

Step 1: Confirm VAT Registration

Only VAT-registered taxpayers can claim input tax. Ensure your business has:

• A valid VAT Registration Number
• An active Tax Identification Number (TIN)

Step 2: Purchase from VAT-Registered Suppliers

Input tax is only recoverable if the supplier is legally registered to charge VAT.

Step 3: Insist on Valid VAT Invoices

A valid VAT invoice must include:

• Supplier’s name and VAT registration number
• Supplier’s TIN
• Invoice date and serial number
• Taxable value
• VAT, NHIL, and GETFund clearly indicated

No invoice, no credit.

Step 4: Record Transactions Accurately

All purchases and sales must be recorded in proper accounting records. CETECH Ghana strongly recommends digital accounting systems to reduce errors and improve audit readiness.

Step 5: Separate Input and Output Taxes

Maintain clear distinctions between:

• Input VAT / NHIL / GETFund
• Output VAT / NHIL / GETFund

Step 6: File VAT Returns on Time

VAT returns are filed monthly, regardless of whether tax is payable.

Step 7: Offset Input Tax Against Output Tax

Example:

• Output tax for the month: GH₵8,000
• Input tax incurred: GH₵5,000
• VAT payable to GRA: GH₵3,000

Step 8: Manage Excess Input Credits

Where input tax exceeds output tax:

• Credits may be carried forward
• Refunds may apply in limited, regulated circumstances

Step 9: Retain Records for GRA Audits

Invoices, receipts, and returns must be retained and easily retrievable.

How Individuals Can Benefit—Legally

Individuals benefit from input tax recovery only when operating VAT-registered businesses.

Eligible individuals include:

• Sole proprietors
• Self-employed professionals
• Landlords making taxable supplies
• Independent contractors and consultants

Non-registered individuals and employees cannot claim input tax. This highlights the importance of formalization, a process CETECH Ghana actively supports through business setup, registration, and compliance advisory services.

Common Errors CETECH Ghana Helps Clients Avoid

Through our work with businesses across sectors, CETECH Ghana and relevant partners frequently encounters avoidable mistakes such as:

• Claiming input tax without valid VAT invoices
• Purchasing from non-VAT-registered suppliers
• Incorrect treatment of exempt supplies
• Late VAT filing
• Poor documentation and record-keeping
• Confusing VAT with withholding tax or income tax

Compliance, Record-Keeping, and the Role of Professional Support

Act 1151 places strong emphasis on voluntary compliance supported by effective administration. GRA expects accurate records, timely filing, and transparency.

This is where professional support becomes critical. CETECH Ghana works with businesses to:

• Design VAT-compliant accounting systems
• Train finance and accounts staff
• Prepare and review VAT returns
• Support audits and reconciliations

Compliance is no longer just a legal obligation—it is a competitive advantage.

Why the New VAT System Is a Positive Step for Ghana

The reforms under Act 1151 deliver:

• Greater tax fairness
• Lower hidden business costs
• Improved compliance culture
• Sustainable funding for health and education
• Alignment with international VAT standards

A well-functioning VAT system supports long-term economic growth—and informed taxpayers are central to that success.

Conclusion: Turning VAT Compliance into Business Value

Input tax recovery is one of the most powerful yet misunderstood features of Ghana’s new VAT regime. When businesses understand the rules and apply them correctly, VAT becomes neutral rather than punitive.

At CETECH Ghana, our mission is to help businesses move beyond fear and confusion toward clarity, compliance, and confidence. Act 1151 presents an opportunity—not just to comply, but to build stronger, more resilient enterprises in Ghana’s evolving tax environment.

The businesses that will benefit most from the new VAT system are not those that avoid it, but those that understand it, structure for it, and manage it professionally.