The adoption of the Excise Tax Bill of Bhutan 2025 by the National Assembly marks a pivotal step in modernizing Bhutan’s taxation policy.
With 43 Members of Parliament voting in favor, the bill reflects broad consensus on a bold vision to balance economic equity, environmental responsibility, and public health through targeted taxation.
One of the most noticeable outcomes of the Bill will be the drop in car prices, thanks to the replacement of the Bhutan Sales Tax (BST) of 45%–70% with a unified 5% GST.
The Excise Tax introduced in place of BST also absorbed the previous 10%–20% Green Tax. As a result, vehicle prices are expected to drop by 9% to 21%, a change that will make car ownership more accessible, especially for middle-income households.
In particular, vehicles like the Toyota Hilux, whose price is projected to fall by nearly Nu 3 million due to tax and duty exemptions under the Free Trade Agreement with Thailand, stand to become significantly more affordable.
For the lower-income strata, the impact goes beyond just access to vehicles. The Bill’s design reflects a progressive approach: essential and environmentally sustainable goods are spared or taxed minimally, while harmful, luxury, or non-essential items bear a heavier burden.
For instance, electric vehicles are fully exempted from excise tax, and hybrid vehicles face a much lower rate than large diesel engines, signaling a clear tilt towards sustainability and energy efficiency.
Crucially, the excise structure is calibrated not just for affordability but also for social welfare. Higher taxes on tobacco, alcohol, and sugary carbonated drinks aim to curb consumption of products detrimental to public health.
For example, the price of a 500 ml Druk 11,000 beer can will rise from Nu 65 to Nu 90, and a packet of Gold Flake cigarettes will jump from Nu 300 to Nu 420.
These increases are steep, but they are intentional deterrents, particularly for the youth, while generating significant revenue for the government.
Furthermore, the excise tax is to be applied equally to both imported and domestically produced goods, ensuring fair competition and protecting Bhutanese producers. With 170 taxable items and 262 exempted or zero-rated goods, the bill embodies what the Economic and Finance Committee calls a “balanced approach.”
The reduction in taxable items compared to the 2022 GST Act—from 157 to 108—also indicates a shift toward simplification and targeted revenue generation.
The Excise Tax Bill is not without concerns as price reductions depend on whether dealers pass on savings to consumers, and high taxes on addictive substances risk expanding the black market. However, with transparent enforcement and public awareness, these challenges can be mitigated.
Ultimately, the new taxation regime is a bold step toward a more equitable and sustainable economy. It helps ordinary Bhutanese access essential goods while disincentivizing harmful consumption and bolstering public revenues.
As the Bill moves to the National Council, it deserves strong support for aligning fiscal policy with national wellbeing.
