Category: Bhutan

Thimphu: With the Goods and Services Tax (GST) and Excise Tax set to come into force in January next year, business communities are urging the government to provide transitional relief. Many businesses are holding large volumes of stock taxed under the current system and fear they could face double taxation and financial losses under the new tax regime.

Some of the hardest-hit sectors include automobile, handicrafts, ICT and hardware businesses.

Many businesses are still holding goods purchased years ago, for which taxes have already been paid. They worry that during the transition to GST, their older and more expensive stock may have to be sold at higher prices, while newly imported goods under the GST system could be cheaper. This, they say, would put them at a competitive disadvantage.

Thinley Dorji, the president of the Bhutan Hardware Association said, “Some businesses have inventory worth between Nu 50 M and 70 M. Once the new tax comes into effect, we will have to pay an additional five per cent GST on goods that have already been taxed. This will make it difficult to sell existing stock, as there will be a big price difference compared to newly imported goods.”

“We have been informed that GST will be charged on old stock. We have already paid different forms of sales tax under the previous system. Adding GST on these goods will result in double taxation and push prices up,” said Tshering Gyeltshen, the general secretary of the Traders Association of Bhutan.

Businesses have also raised concerns about paying taxes at the point of entry, saying it uses up their money before any sales are made. They argue that paying tax at the point of sale would improve cash flow and make the new GST system easier to manage.

“At the point of entry, we have to pay both input GST and excise tax, which blocks a huge amount of our funds. If the government allows payment at the point of sale instead, it would greatly benefit us,” said Pema Dorji, the general manager of the Samden Vehicles Pvt. Ltd.

For vehicle dealers such as Samden Vehicles, the bonded warehouse facility introduced in October has helped ease the transition. Under this arrangement, GST and excise tax are levied only after the sale of vehicles imported before January next year. However, the facility will be discontinued from next month.

“We are currently exempt from tax when we declare our goods at the warehouse, paying only at the point of sale. From 2026, under the new GST, we will have to pay tax at the point of entry and again after selling the goods,” added Pema Dorji.

However, the Department of Revenue and Customs said no transitional relief is permissible under the GST Framework.

Around fifty representatives met with the Bhutan Chamber of Commerce and Industry to raise their concerns on Friday.

The BCCI says it will compile the concerns and present them to the Prime Minister, seeking a solution that balances government revenue and business sustainability.

“I will compile all the issues and personally pursue them with the Honourable Prime Minister. The government has previously considered our genuine concerns, and we hope there will be consideration this time as well,” said Tandy Wangchuk, the president of the BCCI.

While businesses acknowledge the challenges of transitioning to a new tax system, they remain hopeful that the government will address their concerns and provide relief measures.