RENUKA RAI | Thimphu
The National Assembly has endorsed a proposal to significantly expand Goods and Services Tax (GST) exemptions on essential commodities and welfare-related items in a move aimed at easing the rising cost of living for Bhutanese households.
The Goods and Services Tax (Amendment) Bill 2026, introduced by Finance Minister Lyonpo Lekey Dorji, proposes increasing the number of GST-exempt items under Schedule IV C of the GST Act from nine to 31 by adding 22 new items covering staple food products, edible oils, hygiene products, and assistive devices for persons with disabilities.
The House endorsed the proposal on May 25 during deliberations on the third reading of the Bill. Presenting the Bill, Member of Parliament for South Thimphu and Economic and Finance Committee (EFC) member Tshewang Rinzin said the amendments were necessary to address implementation gaps related to Bhutan Trade Classification (BTC) codes and to ensure broader coverage of essential goods consumed by Bhutanese households.
He explained that while Parliament had earlier approved GST exemptions for several categories of goods, certain varieties were unintentionally excluded because they were not specifically reflected under BTC classifications during implementation.
The proposed exemptions include multiple varieties of rice such as husked brown rice, red rice (Yeechum), and semi-milled or wholly milled rice. The House also approved exemptions on widely consumed edible oils including soybean oil, groundnut oil, palm oil, sunflower oil, coconut oil, mustard oil, sesame oil, maize oil, and olive oil, along with vegetable fats and oils.
Salt products such as iodised salt, non-iodised salt, and rock salt are also included under the revised exemption schedule.
The Bill further expands exemptions to cover sanitary towels, tampons, baby napkins, diapers, and wheelchairs for persons with disabilities, whether mechanically propelled or not.
According to the explanatory note attached to the Bill, the proposed amendments are intended to reduce the financial burden on households, strengthen food security, and improve accessibility and welfare support for vulnerable groups.
“The government remains committed to building a tax system that is equitable, inclusive, and responsive to the needs of the people,” Lyonpo Lekey Dorji said while introducing the Bill in the National Assembly.
He said the amendments are part of broader efforts to ensure that essential goods remain affordable amid increasing living costs and changing economic conditions.
The explanatory note states that the GST framework, enacted in 2020, was designed to create a fair and transparent taxation system aligned with Bhutan’s development philosophy and constitutional principles.
Schedule IV C currently contains a limited list of exempt goods based on social necessity and public welfare considerations.
With inflation and household expenses becoming growing concerns, the government stated that expanding the exemption list would help reduce the tax burden on everyday essentials while supporting household consumption and economic activity.
During the deliberations, several Members of Parliament raised questions regarding the implementation and scope of the proposed exemptions.
Deputy Speaker Sangay Khandu pointed out that there are multiple varieties of Yeechum and questioned whether all varieties would be covered under the exemption list.
In response, MP for Mongar Naiten Wangchuk said “the Department of Revenue and Customs (DRC) had clarified that semi-milled or wholly milled rice already covered different varieties of white rice”.
However, Speaker Lungten Dorji instructed the committee to obtain written clarification from the DRC to ensure that all varieties of Yeechum would be clearly included to avoid confusion during implementation.
Choekhor-Tang MP and Deputy Chairperson of the EFC, Kuenzang Thinley, explained that certain rice varieties could not be separately listed because some fall under domestic BTC classifications while others are recognised under international BTC systems, which are updated only during periodic international review meetings.
“Certain rice varieties could not be separately added because they are not yet recognised under international BTC codes,” he said.
The MPs also discussed whether all edible oils would qualify for exemption, including oils that may not currently be widely consumed in Bhutan.
MP for Nanong-Shumar Yeshey Jamtsho questioned how oils outside the listed BTC codes would be treated and whether oils intended for animal feed could also qualify for exemptions.
Responding to the concerns, Speaker Lungten Dorji clarified that all edible oils falling under the “others” category would also be exempted regardless of whether they are imported or locally produced.
Meanwhile, MP for Khamaed-Lunana Pema Drukpa raised concerns about chemically processed edible oils and sought clarification on whether such products would remain exempt under the revised schedule.
Committee member and MP for Radhi-Sakteng Tashi Tenzin clarified that the exemption schedule ultimately covers edible oils commonly consumed in the country.
Discussions in the House also focused on exemptions on related to persons with disabilities. MP for Bumdeling-Jamkhar Wangdi stressed that taxing essential products required by persons with disabilities would place an unfair burden on vulnerable groups.
“There are around 44,000 persons with disabilities, accounting for about seven percent of the population. Taxing their basic essentials equally as others seems unfair,” he said.
Opposition Leader Dasho Pema Chewang also proposed that essential assistive items such as hearing aids and spectacles should be considered for future exemptions. He further suggested that electricity and internet services should also be examined as possible essential services deserving tax relief.
According to the Ministry of Finance, although the expanded exemptions could have revenue implications, making essential commodities more affordable is expected to support consumption, strengthen economic activity, and contribute to the welfare of citizens.
The Ministry stated that the amendment has been introduced under Section 30 of the Goods and Services Tax Act of Bhutan 2020, which empowers Parliament to amend Schedule IV C by inserting or removing BTC codes for GST exemptions.
If enacted, the amendment will increase the number of GST-exempt items from nine to 31, representing one of the largest expansions of exemptions since the GST framework was introduced.
The bill was passed with 45 members voting in favour and will be forwarded to National Council for endorsement.
For many Bhutanese households, the proposed exemptions are expected to bring some relief on everyday necessities while reflecting the government’s broader effort to balance revenue reforms with social welfare priorities.
