The Bhutanese Leading the way.
This paper asked the Ministry of Finance (MoF) that given the under collection of GST Revenue compared to the old BST, administrative and compliance burden for small businesses and inflation of essential goods and services, would the government consider doing away with GST or modifying it.
The Finance Minister Lekey Dorji said, “The government would like to clarify that revenue maximization was not the primary objective of introducing the Goods and Services Tax (GST). GST is a long-term structural reform aimed at modernizing Bhutan’s taxation system by improving efficiency, transparency, and economic productivity, while creating a more robust and future-ready tax framework.”
He said that as with any major reform, GST requires time to stabilize. Being in its early phase, current revenue outcomes should not be directly compared with the previous system.
Lyonpo Lekey Dorji said international experience shows that such transitions involve an initial adjustment period, after which compliance improves and revenues become more stable and sustainable.
He pointed out that the government fully recognizes that the transition has placed some pressure on businesses, particularly small enterprises with limited capacity, and has also raised concerns among citizens regarding the cost of living. These concerns are valid and are being taken seriously.
“Efforts are underway to simplify processes, improve system usability, and ease compliance requirements, especially for smaller taxpayers. The government is also continuing to engage closely with stakeholders to refine implementation based on practical feedback,” added Lyonpo.
He said it is also important to emphasize that GST has been designed and adapted to Bhutan’s context, taking into account the structure of the domestic economy. He said it is not a copy-paste system, but a reform that will continue to evolve based on national experience.
He added, “However, I must inform here that 176 economies across the world have adopted GST or VAT and are considered the most modern and comprehensive consumption taxation system.”
Lyonpo said that on the issue of inflation, while GST may be perceived as contributing to price increases in the short term, it is in fact a more transparent and efficient tax system that reduces cascading effects present in the earlier regime. As compliance improves and the system stabilizes, these effects are expected to moderate.
He said GST must, therefore, be seen in terms of its long-term national value in strengthening transparency, improving fairness in taxation, and supporting private sector development through a more predictable and efficient system.
Lyonpo said reversing GST is neither practical nor desirable. He said the government’s focus is on refining and strengthening its implementation, addressing genuine concerns, and ensuring that GST delivers its intended long-term benefits in a manner that is inclusive, practical, and sustainable.
