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How to calculate the 3% VAT Flat rate

There are two types of VAT systems in Ghana: the Standard scheme and the Flat rate. While the former comes with a composite percentage of 17.5%, the latter is 3%. The objective of this short article is to equip readers with knowledge on how to compute the 3% Flat rate VAT.

Before we start to look at how it is computed, let us take note of the following:

  1. VAT inclusive/Invoice amount: This is the amount served by a seller to a buyer for payment for the supply of a good or service. It is an invoice amount that has the VAT in it. In percentage terms, this is 103%.
  2. VAT exclusive amount: This refers to an invoice amount that does not have the VAT in it. In percentage terms, this is 100%. What makes this different from the first is the VAT of 3%.
  3. 3% Flat rate VAT applies to only retailers and wholesalers. All others that fall outside this group should apply the standard scheme to their operations.

Computations under 3% Flat rate VAT

Step 1: Decide on the amount that you will charge a customer or buyer for a good or service. This is what is called the VAT exclusive amount, say GHS200.

Step 2: Calculate 3% on the VAT exclusive amount. Using the GHS200 in step one, we get GHS6 (GHS200*3%)

Step 3: Add the two results or amounts in Steps 1 and 2 to get the amount to charge the customer. Thus, the customer pays GHS206 for the product.

Summary

  • The amount in Step 1 or VAT exclusive amount is the total amount that becomes the revenue of the seller (thus, the GHS200).
  • The GHS6 (VAT payable) in Step 2 is an amount that must be paid to GRA.
  • Finally, when the seller receives the GHS206 from the customer, he will retain GHS200 as his revenue and remit the GHS6 to GRA as VAT.

Remember the points mentioned earlier before the explanations.

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