The Bhutanese Leading the way.
Ordinary people, the government and Parliamentarians may be happy that the Excise Tax Bill 2025 and the Goods and Services Tax (GST) Amendment Bill 2025 will lead to a sharp reduction in vehicles prices from a minimum of around Nu 113,000 to a maximum of Nu 660,000 and even Nu 2.9 million for Hiluxes (when the FTA with Thailand lifts the Custom Duty).
However, passenger vehicle dealers across the country are an unhappy lot as they have been seeing a high number of cancellations and no new bookings as the tax reductions are only effective from 1st January 2026.
To make matters worse, these vehicle dealers are left holding large stocks of vehicles for which the current higher tax is already paid and so now they wonder who will buy these vehicles. In many cases the stocks of many dealers are so large that they may go under if they are unable to sell them.
What vehicle buyers also need to know is that if these dealers cannot sell these high tax stocks, then they may very well be unable to pass on the tax benefits from next year. This, however, creates a big danger for vehicle dealers as Bhutanese may then resort to directly importing the vehicles from India.
At stake is the future of an entire industry and hundreds of jobs and billions in investments.
Vehicle dealers all say they underwent the pandemic and then the two-year vehicle import moratorium from August 2022 to August 2024 and just when they are recovering from their losses of years, they have been set back even more due to the timing of the tax deductions.
Zimdra is easily the largest vehicle seller in Bhutan with its many low cost and popular options from Alto to Brezza, Grand Vitara and others.
Ever since it became known that tax reductions will happen from 1st January 2026, Zimdra within the last one week has seen around 30 cancellations and no new bookings when before that there used to be 7 to 10 bookings in a day.
To make matters worse, Zimdra has around 200 vehicles in stock, most of which came in June 2025 for which it has already paid the 10% to 20% Green Tax at Phuentsholing at the point of entry and is expected to collect Bhutan Sales Tax of 45% to 60% from customers at the point of sale. The customers will also be charged the Green Tax that has already been paid.
A Zimdra official said that Zimdra has to forecast to its principal suppliers in India the demand for the year ahead and in the next six months till December around 600 vehicles are coming which has already been ordered and are in the production line up.
The Zimdra official said this is about 800 vehicles in stock by December under the current higher tax regime with the average price of each vehicle at Nu 1.2 mn and so it comes to almost Nu 1 bn (Nu 960 mn) as potential losses just for Zimdra. The Zimdra official said this would sink the company as it cannot recover from such a magnitude of losses and unsold stock.
The Zimdra official said, “When there was a two-year moratorium, we were under a loss but we kept the employees on pay.”
Zimdra has around 100 employees in its various offices, showrooms and service centers.
Zimdra is currently in communication with its suppliers but there is no hope as payment has already been made for the 200 vehicles and 600 has been ordered for which they have to pay and it will be delivered in the coming months.
Zimdra has a policy of 2% of the vehicle cost as a cancellation fee but Zimdra has never enforced this till date, as the feeling of the management has been that most of its customers are from the middle class and so there is no point taking this from them.
Another major player in the vehicle market is Kia Motors which has around 50 plus employees. It has 31 vehicles in stock with another 72 cars to join it soon taking the total to 103 vehicles in stock. The average price of Kia vehicles is around Nu 1.8 mn which could mean losses of around Nu 185 mn for Kia Motors.
Kia has already seen 12 cancellations and no new bookings. Kia has also paid its taxes.
Kia’s cancellation fee is around 10% of the advance which is around Nu 20,000 to Nu 30,000.
Bhutan Hyundai Motors is another major player with around 100 plus vehicles in stock and around 49 employees including its Isuzu unit. The company has also been seeing a lot of cancellations and no new bookings.
Samden Motors said it has around 20 passenger cars in stock and has seen 2 to 3 orders being deferred. The cancellation charge is around Nu 10,000. The company is also worried about its future.
Samden said it also sells trucks and the impact here is negligible as trucks were already minimally taxed and moreover people buy trucks when major construction projects or works come up.
Mahindra vehicles said the impact is not much on utility vehicles given the already minimal taxes but it will be hit on its higher end Scorpio vehicles with around 13% tax difference. Mahindra has around 75 to 80 employees.
Honda said it has also been hit as people are calling in for cancellations and it has 13 cars in stock. Its cancellation fee is around 10% of the selling price of the vehicle.
STCBL Motors saw around 60 attempted cancellations for its Innova hybrid car which is popular with tour operators.
The Innova car in the petrol model would mean a saving of 13% or around Nu 399,513 but STCBL does not sell the petrol version and it sells only the hybrid version which has a lower tax saving of 6% or around Nu 152,000.
STCBL could stall the cancellations by saying the tax difference is only Nu 28,528 which was a calculation error by a staff member. However, once buyers find out the saving is Nu 152,000 then there could be actual cancellations.
The only saving grace for STCBL is that only 8 or 9 cars are in stock and 30 or 40 are coming by December which it will try and move to January to avoid the higher taxes.
STCBL has not been hit as far as Prados are concerned as people buy it on quota or the government buys it. In the case of Fortuners and Hiluxes again the main customer is the government which means there is no impact there.
STCBL said that from 2026 it will get the Toyota Hilux from India which means no custom duty and so the vehicle will be much cheaper with both the CD and Excise Tax savings.
Vehicle dealers across the board say the only solution is to make the GST and Excise Bill tax rates for vehicles effective from May itself when these bills were introduced in Parliament. This is what the National Council has also been saying quoting the Public Finance Act.
They say if this is not done then it will lead to billions in losses for the vehicle dealers and hundreds in job losses.
