The Bhutanese Leading the way.
Bhutan’s long-delayed Goods and Services Tax (GST) will finally take effect from 1st January 2026, following the National Assembly’s endorsement of the GST (Amendment) Bill 2025 recently. Lawmakers rejected the National Council (NC)’s proposal to implement the tax immediately, citing the need for proper preparation and public awareness to avoid confusion for businesses.
The GST will apply a flat 5 percent tax on most goods and services, while exempting essential items such as rice, salt, cooking oil, sanitary pads, wheelchairs, as well as health, education, financial services, and exports. Electricity will also be taxed at 5 percent, but rural households will retain the existing subsidy on the first 100 units.
The timeline for GST has been shaped by repeated delays linked to the failed Bhutan Integrated Taxation System (BITS). Launched in 2020 to support the new tax system, BITS never became operational despite cost overruns of over Nu 119 million and multiple deadline extensions, eventually leading the government to terminate its contract in 2022. A replacement system, BITS 2, is now under development by a New Zealand-based firm with a budget exceeding USD 12 million.
During the Joint Sitting of Parliament, several MPs raised concerns about the lack of accountability for the failed project and the need for stricter monitoring to prevent similar issues in the future. The Public Accounts Committee acknowledged the Royal Audit Authority has identified where responsibility lies, but said accountability measures have yet to be enforced.
The Assembly also rejected the NC’s proposal to shift tax dispute appeals to an independent tribunal, deciding instead to keep them under a review board in the finance ministry, arguing it offers quicker and more accessible resolution for taxpayers.
The Bill will now be submitted to His Majesty The King for Royal Assent. While the GST finally has a clear launch date, Parliament’s discussions underscored the need to learn from past mistakes and ensure public funds are better protected as Bhutan modernises its tax system.
