GST and prices

There are four main reasons for the price increases under the new GST Tax regime. The first is that GST by itself increases prices of zero rated items under the old Bhutan Sales Tax by (BST) at least 5% and these are items like vegetables, cereals, medicines, fruits etc. This is unavoidable.

The next reason for the price increase is due to double taxation as old stock, which underwent the BST, is also attracting the GST.

This should get resolved in the next one to three months. This is because the Department of Revenue and Customs had sent repeated reminders to major wholesalers about the issue and so many of them ensured they did not keep a large amount of old stock.

Some grocery wholesalers in Thimphu say their old stocks should mainly run out by the end of January and they have already started taking in new stock from January charged with only GST.

Retailers will also have some old stock, but it should finish or reduce sharply in the next three months if not longer by one or two more months depending on their ability to sell.

The third reason is that non-registered businesses that are not supposed to collect GST were collecting GST. This has happened mainly due to ignorance. The DRC has already made it amply clear that this is not allowed. Going ahead such outlets could face fines and other action.

The fourth reason is that some outlets are charging GST on the whole amount instead of just the value added part. The GST should be charged only on the value added part and not the whole item as it can lead to double taxation. This needs to be resolved through education and monitoring.

Ultimately, despite all the complaints in the short term, the GST is a self-regulating tax that will rely on market prices.

Businesses that chose to not pass on tax benefits or overcharge will find themselves rapidly losing customers and businesses to rivals who follow the rules.

“I hate paying taxes. But I love the civilization they give me”
Oliver Wendell