Gov’t considers restoring 20% VAT exemption on locally assembled vehicles

The government is considering reinstating the Value Added Tax (VAT) exemption on locally assembled vehicles following concerns from industry players that the removal of the incentive has negatively affected vehicle production, reduced competitiveness, and threatened investments in Ghana’s growing automotive sector.

The potential policy reversal was disclosed by the Head of Strategic Manufacturing at the Ministry of Trade, Agribusiness and Industry, Kwasi Ofori-Antwi, during the Citi Business Festival 2026 Roundtable held on Thursday, June 25, on Channel One TV.

The roundtable discussion, themed “Driving Ghana Forward: The State of the Automotive Assembly Industry and Its Contribution to the Economy,” brought together key stakeholders to examine the challenges and opportunities within Ghana’s automotive manufacturing sector.

Speaking during the event, Mr. Ofori-Antwi explained that the decision to suspend the VAT incentive followed an assessment conducted by the Ministry of Finance, which concluded that the intended benefits of the tax exemption were not adequately reaching consumers.

According to him, government officials believed the tax relief was not translating into lower vehicle prices as originally anticipated.

“There was an assessment on the industry by the Ministry of Finance and the Ministry felt that the VAT which was to be enjoyed by consumers was not trickling down to industry, so that was put on hold. The industry people have engaged the Ministry of Finance to that effect,” he said.

He, however, indicated that government is reconsidering the decision after extensive engagement with stakeholders in the automotive assembly industry.

“Government didn’t want industry to hold on to that perception. So government will be reviewing that and we are very hopeful that it will be restored,” he added.

Automotive assemblers have consistently argued that the introduction of a 20 percent VAT on locally assembled vehicles has undermined the competitiveness of domestically produced vehicles compared to imported alternatives.

Industry stakeholders say the tax has increased the cost of locally assembled vehicles, making it more difficult for manufacturers to attract buyers in a highly price-sensitive market.

They warn that maintaining the tax could force assembly plants to reduce production volumes, scale back expansion plans, and potentially affect hundreds of skilled jobs in engineering, manufacturing, logistics, and technical services.

According to industry operators, the policy change risks slowing the momentum that Ghana has built in attracting global automotive manufacturers to establish operations in the country.

The concerns come against the backdrop of the Ghana Automotive Development Policy, which was launched in 2018 as part of the government's industrialisation agenda.

The policy was designed to position Ghana as a leading automotive manufacturing and assembly hub in West Africa by attracting global vehicle brands to establish assembly plants locally.

Key objectives of the initiative included promoting local manufacturing, facilitating technology transfer, creating skilled employment opportunities, and developing a sustainable automotive value chain.

To support the industry, government introduced several incentives, including a zero-rated VAT regime on locally assembled vehicles and import duty concessions of between five and 10 percent on components and parts used in vehicle assembly.

These incentives helped attract several international automobile manufacturers to establish assembly facilities in Ghana, creating new investment opportunities and supporting economic diversification.

Industry stakeholders have repeatedly stressed that policy consistency remains crucial for maintaining investor confidence and encouraging long-term investments in the sector.

Manufacturers argue that sudden policy reversals can create uncertainty, making it difficult for investors to plan production, pricing strategies, and future expansion projects.

They maintain that Ghana’s automotive assembly industry is still in its developmental stage and requires sustained policy support to achieve economies of scale and compete effectively with more established manufacturing hubs on the continent.

Stakeholders also believe that a supportive policy environment will help increase local content participation and strengthen Ghana’s position under the African Continental Free Trade Area (AfCFTA).

If restored, the VAT exemption is expected to provide a significant boost to demand for locally assembled vehicles by reducing prices and improving competitiveness.

Industry analysts say the move could stimulate production, protect existing jobs, attract additional investments, and accelerate the growth of supporting industries within the automotive value chain.

The possible reinstatement of the tax incentive is therefore likely to be welcomed by vehicle assemblers and investors who view it as essential to achieving the long-term objectives of Ghana’s industrialisation and manufacturing agenda.

As government reviews the policy, stakeholders remain hopeful that restoring the VAT exemption will reinforce Ghana’s ambition of becoming a major automotive production and export hub in West Africa.