As Bhutan moves forward with the development of Gelephu Mindfulness City (GMC), authorities are working to dispel uncertainty around how taxes will apply within the Special Administrative Region, particularly as the country transitions toward a Goods and Services Tax (GST) framework.
While GMC operates outside the national GST system for now, the Ministry of Finance has confirmed that certain services and goods will still be subject to GST. Telecommunications services used by residents within GMC and the purchase of passenger vehicles will attract GST, even as most other economic activities in the city remain under the Bhutan Sales Tax (BST) regime.
To formalize these arrangements, the finance ministry announced that a Memorandum of Understanding will soon be signed with the GMC administration. The agreement is expected to clearly define how GST will apply in specific cases and harmonize the tax treatment between GMC and the rest of the country.
For businesses operating in the city, the government has offered reassurance. Companies in GMC will not be required to register for GST at this stage, as the city will continue using the sales tax system while other regulatory frameworks are still evolving. Officials say this approach is intended to provide stability and predictability for investors during the city’s formative years.
At the local level, the GMC Governor has been engaging directly with business owners, regional officials and residents through a series of consultations. These meetings aim to explain the differences between GST and the existing sales tax system, and to address concerns about compliance and future changes. According to the GMC administration, keeping policies simple and investor-friendly remains a priority in the early phase of development.
Governor Dr Lotay Tshering has emphasized that the decision is not about weighing one tax system against another. He noted that while GST is widely used and often more efficient in many economies, abruptly changing the tax framework for companies that are already registered—or in the process of registering—would create unnecessary disruption.
Despite GMC’s exemption from GST in most areas, exceptions are unavoidable. Telecommunications services, for example, will continue to be taxed under GST because the city does not yet have its own telecom provider or dedicated SIM card system. As a result, these services cannot be distinguished from those used elsewhere in the country.
The Department of Revenue and Customs (DRC) has also clarified that other government-registered service providers operating in GMC—such as banks, insurance companies and Bhutan Power Corporation—will be formally instructed not to levy GST. Officials said discussions are ongoing to ensure that citizens within the same country are not subject to conflicting tax jurisdictions.
One of the more complex issues under review involves the movement of goods between GMC and the rest of Bhutan. Authorities are examining whether goods transported out of Gelephu should be treated as imports, a classification that would trigger GST, customs duty and excise duty. Such a scenario could lead to different tax outcomes for identical goods entering Bhutan through different entry points, an inconsistency the government says it is committed to resolving.
Speaking at a press conference in Thimphu, the finance ministry said all outstanding questions are expected to be settled once the MoU is finalized, bringing greater clarity and alignment between GMC and national tax policies.
To support taxpayers during this transition, a Taxpayer Service Center has been set up at the Regional Revenue and Customs Office in Gelephu. Staffed with support from international tax experts, the center will provide guidance and assistance to both businesses and residents.
Customs arrangements have also been strengthened to better manage the flow of goods. In addition to the main customs office at the Bhutan–India border, two new checkpoints have been established—one at Shaychamthang along the Gelephu–Tsirang highway and another at Serzhong on the Gelephu–Zhemgang route—signaling the government’s intent to balance facilitation with oversight as GMC takes shape.
