GST rolled out from 1st January

The Goods and Services Tax (GST) was launched on 1st January with businesses having an annual turnover of Nu 5 million (mn) and above required to compulsorily register under the new tax regime. Businesses with an annual turnover of Nu 2.5 mn and above are eligible to voluntarily opt into the GST system.

According to the Department of Revenue and Customs (DRC), the registration threshold has been set at Nu 5 mn based on the capacity of businesses to comply with the department’s administrative and compliance requirements. The department stated that this threshold is intended to ensure that only businesses capable of managing GST-related obligations are brought under the mandate.

To promote competitiveness, exports of goods and services applied outside Bhutan are taxed at a zero percent rate. Under the GST framework, the final tax burden will be borne by consumers rather than producers or suppliers. Businesses that fall under the GST mandate will be issued certificates to prevent confusion among consumers.

The Finance Minister, Lekey Dorji, stated that essential items that matter most to households, including rice, salt, cooking oil, sanitary napkins, and wheelchairs, have been exempted from the GST regime. Lyonpo Lekey Dorji further said that in the services sector, health services, education services, and selective financial services have also been exempted.

The Finance Minister added that the Nu 5 mn threshold was set to ensure that small businesses are not burdened with compliance requirements beyond their capacity. He noted that the ministry will closely monitor the implementation of GST and its impact on households and businesses, and assured that the ministry will respond positively and without delay if adjustments are found to be necessary.

The DRC stated that there will be minor instances of double taxation during the initial phase of the GST regime, which it described as unavoidable. It explained that if goods fall under old stock for which taxes have already been paid, a five percent GST will still need to be charged. At the same time, it clarified that not all imported goods are tax levied.

The Finance Secretary, Leki Wangmo, said that the ministry had requested relevant associations that raised concerns to submit their inventory details and accounts from previous years so that transitional periods could be reviewed and considered for certain businesses. However, she noted that such submissions have not yet been received.

The Finance Secretary also stated that the introduction of GST could serve as a learning opportunity for the business sector, encouraging businesses to adopt proper accounting practices and maintain comprehensive records of their transactions.