Agency: The Goods and Services Tax (GST) system will be implemented from 1st July 2025 according to the Ministry of Finance.
The GST Act was passed in 2020 but the online BITS system was not ready and so it got another extension in 2022 with an Amendment with enforcement to happen only once the Parliament grants approval.
The GST Amendment Bill of Bhutan 2024 is coming up in the upcoming winter session of Parliament to make certain changes and lay the legal groundwork for the implementation from 1st July 2025 onwards.
The original Act had a single GST tax rate of 7% for all goods and services by subsuming the current sales tax. GST will allow to reform both direct and indirect taxes that people often find burdensome. As a consumption tax, GST will ensure that those who consume goods and services are responsible for paying the associated taxes. It will also avoid double and triple taxation.
It will reduce the tax burden, and at the same time lead to higher tax collection by making it more broad-based, as it will give incentives to those who register. Past estimates said Nu 3 billion (bn) more can be collected every year using GST.
A source said the system development is already progressing after the Department of Revenue and Customs (DRC) announced the signing of a contract with Data Torque Limited (DLT) for New Zealand for the development of the Bhutan Integrated Taxation System (BITS) in August.
Earlier attempts to develop the BITS in the country through the Thimphu Tech Park Limited (TTPL) was not successful, and TTPL and its foreign Armenian partner were eventually terminated. Systems were not delivered on time and Bhutan had overestimated its capacity to develop such a complex system in the country. COVID also played spoilsport.
The New Zealand company is globally reputed and has a good track record in developing such systems.
Bhutan will adopt the online GST system of New Zealand with some changes relevant to Bhutan.