Retail Scheme

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Retail VAT Scheme

Under the VAT system, the standard method of accounting for output tax is through the issuance of tax invoices. By law, these invoices must contain prescribed details, including the taxable value, applicable rate, and the amount of VAT charged. This enables the supplier to account for output tax and allows VAT-registered customers to claim input tax where applicable.

However, in many retail environments – such as supermarkets and shops selling high-volume, low-value goods – it is impracticable to issue tax invoices for each individual sale. To address this, Retail VAT Schemes have been introduced.

Retail VAT Schemes allow eligible VAT-registered persons to calculate and account for output tax without issuing standard tax invoices for each sale.

What This Guide Covers

Who is eligible to use a Retail VAT Scheme
The types of Retail VAT Schemes available
How the schemes operate

Approval to Use a Retail Scheme

Before applying any Retail VAT Scheme, a taxable person must obtain written approval from the Commissioner-General of the Ghana Revenue Authority (GRA).

Who Is Eligible to Use a Retail VAT Scheme?

Retail VAT Schemes generally apply to retailers of goods only.

If you make both retail and non-retail sales, you may apply a Retail VAT Scheme only to your retail sales.
Any non-retail or business-to-business supplies (for example, supplies made to other VAT-registered persons) must be accounted for outside the scheme.
Supplies outside the scheme must follow the normal VAT rules, including the issuance of tax invoices in line with Section 43 of VAT Act 1151.

Examples: – Hotel accommodation and restaurant meals must be accounted for using normal VAT invoicing. – A business that provides catering services but also operates a retail shop may use a Retail VAT Scheme only for the retail shop, provided separate records are maintained for each activity.

Available Retail VAT Schemes

Scheme 1: Scheme 1: VAT Supplies Only

This scheme applies where all supplies are subject to the VAT.

If all your supplies are VAT taxable, this is the only scheme you may use.

Scheme 2: Mixed Supplies (Taxable and Exempt)

This scheme is used where a business makes both taxable and exempt supplies and both sales (taxable and exempt supplies can be accounted for separately or can be distinguish from each other).

Takings must be separated at the point of sale, for example by using:
- Separate tills, or
- Multi-total till systems
Where accurate separation is possible, this scheme is simple and straightforward to operate.

Scheme 3: Mixed Supplies (Where Separation Is Not Possible)

Scheme 3 is an alternative to Scheme 2 and applies where it is not possible to distinguish taxable and exempt supplies at the point of sale.

The taxable proportion of sales is determined based on the proportion of taxable goods purchased for resale.
This assumes that goods purchased for resale are sold in the same proportion as they are bought.

How the Retail VAT Schemes Operate

All Retail VAT Schemes share the following key components:

1. Daily Gross Takings (DGT)A record of all payments received from customers for supplies made during the day. Taxapayers granted the use of the retail scheme required to record total cash at hand at the end of the day, add it to expenditure incurred during the day and credits. This gives the daily gross taking which are to be aggregated at the end of the to constitute supplies for the month.
2. Retail Scheme Calculation (RSC)A calculation used to determine the taxable proportion of the daily gross takings.
3. VAT FractionThe VAT fraction is applied to the taxable portion of the gross takings to determine the output VAT due. VAT Fraction Formula: VAT Rate ÷ (100% + VAT Rate) For the VAT rate of 15% and levies rate of 5% = 20%: 20% ÷120 or 1/6

Key Notes for Retailers

Retail VAT Schemes simplify VAT accounting for eligible retailers.
Accurate record-keeping is essential, especially where different types of supplies are involved.
Written approval from the Commissioner-General is mandatory before using any scheme.
For further guidance, taxpayers are encouraged to consult the relevant VAT Guidelines or contact the nearest GRA Offices.

Relevant VAT downloads

click below to download a VAT doc