Bhutan has ushered in a new chapter in public finance with the rollout of the Goods and Services Tax (GST), a reform aimed at updating the country’s tax framework and reinforcing long-term economic stability. The new tax regime came into effect this month as part of broader efforts to strengthen domestic revenue and reduce reliance on external funding.
The GST is designed with equity at its core. Essential goods and services—including basic food items and healthcare—have been kept outside the tax net to shield households from added costs. At the same time, the system broadens the tax base in a way the government believes will support sustainable growth and more predictable public finances.
Speaking on the reform, Finance Minister Lekey Dorji underscored the importance of protecting smaller enterprises. Businesses with an annual turnover below Nu 5 million are exempt from GST registration, a threshold set to ease the transition and prevent undue pressure on micro and small firms. The measure, he noted, balances revenue goals with the need to nurture local entrepreneurship.
From the private sector, the response has been cautiously optimistic. Sonam Chophel of Druksell Private Limited described GST as a constructive step, particularly for young entrepreneurs. By encouraging businesses to enter the formal economy, he said, the system could improve access to finance, enhance credibility, and create a more level playing field.
Administrative efficiency has also been a key consideration. Finance Secretary Leki Wangmo explained that the Nu 5 million threshold was chosen not only to protect small businesses but also to ensure smoother administration and higher compliance rates. A more manageable number of registered taxpayers, she said, would allow authorities to focus on service delivery and enforcement.
At the operational level, the government has emphasized transparency. Kuenzang Thinley, Project Manager of the Bhutan Integrated Tax System, clarified that GST is ultimately borne by consumers, not businesses. Under the new system, consumers will receive proper invoices, improving accountability and reducing opportunities for tax leakage.
Officials argue that beyond immediate revenue gains, GST is a cornerstone of Bhutan’s push for fiscal independence. By strengthening the state’s ability to mobilize domestic resources, the reform is expected to enhance investment in critical sectors such as education, health, and infrastructure—laying the groundwork for a more resilient economy in the years ahead.
