The Bhutanese Leading the way.
The National Assembly adopted the Excise Tax Bill of Bhutan 2025 on 17th June with 43 Members of Parliament (MPs) voting in favor and two against, out of the 45 MPs present.
The Bill essentially means lower costs for cars for two reasons. The first is that it did away with the high Bhutan Sales Tax of 45% to 70% and replaced it with the 5% GST, and secondly the Excise Tax that was supposed to cover up the reduced GST did away with the 10% to 20% Green Tax as it was thought that the Excise rate is already covering the environment component.
In short car prices should reduce by 9% to 21%.
With the Free Trade Agreement with Thailand also in Parliament, the price of a Toyota Hilux will see the biggest drop since the Custom Duty will be done away with too. Hiluxes are made in Thailand too by Toyota.
The current selling price of a Hilux by STCBL is Nu 9.068 million (mn). The Custom Duty being done away is Nu 1.758 mn and the doing away of the BST and the Green Tax being absorbed into Excise is another Nu 1.178 mn saving which is a total reduction of Nu 2.937 mn.
This brings the price of a Hilux to Nu 6.131 mn lower than even the Toyota Fortuner.
The Bhutanese also did a price comparison of different popular cars under the current and next tax rate visible in the main box.
However, the final price next year will depend on the prices then too and also how much benefit the dealers want to pass on.
The excise tax on vehicles has been revised to make a wider range of models more affordable. Electric vehicles will be fully exempt, along with diesel and petrol-powered heavy machinery such as bulldozers and excavators.
Hybrid vehicles will be taxed at 9%. Petrol cars with engine capacities up to 1200 cc will be taxed at 36% while those between 1200 cc and 1500 cc and between 1500 cc and 1799 cc will be taxed at 54% and 59% respectively. Diesel vehicles will face excise taxes ranging from 54% to 90% depending on engine size, from below 1500 cc to above 3000 cc.
The Bill outlines excise taxes on several products. Alcoholic beverages will be taxed at Nu 1,200 per liter of pure alcohol content.
This means selling price of Highland will increase from the current Nu 325 to Nu 643 with the assumption that ex-factor price remains the same along with the other costs. A 500 ml Druk 11,000 can with 8% alcohol will increase in price from Nu 65 to Nu 90.
Tobacco products, including unstemmed and stemmed tobacco, tobacco refuse, chewing tobacco, zarda, snuff, and cigarettes, will be taxed at Nu 1,500 per kilogram or Nu 10 per stick for cigarettes and biri.
One packet of Gold Flake Cigarettes which contains 20 sticks will see its price go up from the current Nu 300 to Nu 420. The proposed selling price will increase from Nu 20 to Nu 33 for one packet of Khani (Chewing Tobacco) of 10 grams.
The tax on electronic cigarette devices, initially proposed at 100% was revised to 20% following re-deliberation. MP Tashi Tenzin of Radhi-Sakteng said, “The device itself does not contain tobacco, but tobacco is used with it. Tobacco is already taxed at 100%. Globally, some countries tax the device at 5%, while others do not tax it at all. So, we decided not to adopt either the 5% or 0% rate. Instead, we have decided to impose a 20% tax on these devices.”
In the case of carbonated beverages, the House initially supported a 20% tax proposed by the Lamgong-Wangchang MP. However, following further discussion, the House agreed on a 27% rate as recommended by the Committee.
Committee Chairperson MP, Rinchen Wangdi, said, “From the original 30% tax on carbonated drink factories, we reduced it by 3% making it 27% and added 5% GST, bringing the total to 32%. So, the net increase is just 2%. Moreover, these are well-established companies that can absorb the additional 2% tax.”
Presenting the Committee’s review, Tashi Tenzin, a member of the EFC, said, “The Bill is introduced to protect public health and the environment, to discourage the consumption of harmful or addictive substances, to discourage non-essential or luxury consumption, and to promote responsible and sustainable consumption.”
The Bill, comprising 207 sections across ten chapters and two schedules, is set to take effect on 1st January 2026, introducing targeted taxation on the consumption of harmful and non-essential goods.
The excise tax will be applied equally to both imported and domestically produced goods to ensure fair treatment and prevent market distortion. The revised legislation includes 170 taxable items and exempts or zero-rates 262 items. Compared to the GST Act of 2022, the number of taxable goods has been reduced by 32% from 157 to 108, reflecting what the Committee describes as a balanced approach between public interest and economic considerations.
The Bill has now been forwarded to the National Council for further deliberation.
