This Is Why Prices Of Some Goods And Services Will Go Up With The Introduction Of 3% VAT

The prices of certain goods and services manufactured locally and imported will start to increase as a result of the introduction of a 3% VAT Flat Rate Scheme (VFRS).

While the Finance Ministry has insisted that the implementation of the 3% VFRS would not result in prices of goods and services going up, this is not entirely true from economic point of view.

Currently,  industries, manufacturers and importers argued that the tax would result in them paying 3% more in every stage of value addition chain and this will possibly result in them paying a little over 20% as VAT to the state.

General Secretary of the Food and Beverages Association, Samuel Aggrey tells JOYBUSINESS that the development could also lead to prices of goods and services going up for about 9%

Prices of goods and services will increase because of the compounding impact of the 3% VFRS on various value chains.

Depending on the length of the value addition chain, the prices will either go up or fall.

At every stage that a particular raw material goes through any form of value addition, the 3% VFRS will be slapped on it. This means any final products, whose raw materials require different companies to do some form of value addition will see a price hikes, alternatively, other finished products, that have very short value addition chain may see prices remaining the same or at best some marginal reduction in prices.

In the worst case scenario, a consumer may see about 6% to 15% increase in prices of some goods and services.

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