The Bhutanese Leading the way.
More than 3,280 businesses have registered under the Goods and Services Tax (GST) regime over the past two weeks, with Thimphu accounting for the highest number of registrations.
According to the Director General of the Department of Revenue and Customs (DRC), Sonam Jamtsho, 1,820 of the registered businesses are based in the capital, while businesses with an annual turnover of Nu 5 million and above continue to register.
The government has acknowledged that the transition may pose initial challenges for both businesses and consumers. Finance Minister Lekey Dorji said that while people may face difficulties at the beginning, it is important to understand that GST does not introduce a new tax. Instead, he said the system aims to streamline the existing tax structure, create uniformity, and reduce administrative burdens over time.
To assess market readiness, the eight Regional Revenue and Customs Offices (RRCOs) across the country have conducted market surveillance to study the preparedness of businesses and consumers. The DRC Director General (DG) said that the surveillance exercise has been completed and data is currently being collected from the RRCOs. He added that the findings will help authorities better understand how the GST regime may function in practice and allow them to plan accordingly.
Addressing concerns over price monitoring, the Competition and Consumer Affairs Authority (CCAA) stated that setting a reference price list after the application of GST is nearly impossible due to the vast number of commodities in the market. The authority stated that prices frequently fluctuate and brands change, making standard pricing difficult. While Bhutan does not have a system of Maximum Retail Price (MRP), it said such pricing information can still be used as a general guide to understand the value of commodities.
The implementation of GST has also raised jurisdictional concerns related to the Gelephu Mindfulness City (GMC), which has been designated as a Special Administrative Region. DRC DG said that because GMC falls under a different territorial tax jurisdiction, certain GST-related issues have emerged. He added that the DRC is in continuous discussion with GMC authorities to resolve these matters.
On exemptions under the GST regime, Lyonpo Lekey Dorji clarified that although there are five broad exemption categories, not all items within those categories are fully exempt. He gave extra virgin olive oil as an example, explaining that despite falling under the oil exemption category, it will still be subject to a 5 percent GST.
Further clarification on exemptions was provided by the head of the GST division of DRC, Commissioner Kinzang Thinley, who explained that all commodities are classified under specific codes, and exemptions are applied based on these codes rather than individual brands. He said that multiple types or brands of a product may fall under a single code. Under Schedule 4(c) of the GST Act of Bhutan, rice is exempted under one code covering all commonly consumed types, oil under two exempted codes, and all codes related to salt, sanitary pads, diapers, and wheelchairs are fully exempt.
