RENUKA RAI | Thimphu
Four months into Bhutan’s Goods and Services Tax (GST) rollout, the country’s new tax system is facing increasing scrutiny from both the public and parliament as early revenue figures fall short of expectations while consumers continue to report rising prices of essential goods.
According to data from the Ministry of Finance, GST collections reached Nu 3.17 billion in the first four months and six days of implementation. However, this figure remains significantly below the government’s internal projection of about Nu 4.758 billion for the same period, leaving a shortfall of roughly Nu 1.588 billion. The gap has raised early questions about whether the reform is delivering the anticipated gains in revenue mobilisation and tax efficiency.
The government had set an overall GST collection target of Nu 6.8 billion for the six-month period from January to June 2026. This translates to an average monthly target of around Nu 1.133 billion. However, current performance shows monthly GST collections averaging about Nu 755 million, which is not only below target but also lower than the average monthly revenue collected under the previous sales tax system, which stood at around Nu 800.25 million.
This comparison has become a focal point of debate. GST was introduced with the expectation that it would broaden the tax base, improve compliance, and modernise Bhutan’s indirect tax system by replacing the earlier sales tax regime. In theory, the reform was expected to generate more stable and transparent revenue streams. However, the early numbers suggest that the transition phase has been more complex than anticipated.
Officials from the Ministry of Finance have cautioned against drawing early conclusions, noting that GST systems typically require time to stabilise. They explained that monthly collection figures are subject to adjustments such as reconciliation, delayed filings, and refund processing, all of which can temporarily suppress reported revenue. According to the ministry, such fluctuations are common during the early stages of GST implementation, especially as businesses adapt to new compliance requirements.
As of May 4, more than 4,300 taxpayers had registered under the GST framework. The ministry also reported a relatively high compliance rate, with monthly filing compliance at about 98.5 percent and quarterly compliance at around 86.8 percent. In addition, GST refunds amounting to approximately Nu 195 million had been processed by May 6, reflecting ongoing adjustments within the system as businesses claim input tax credits.
Despite these administrative indicators of progress, public concerns have increasingly shifted toward the cost of living. Members of parliament have raised questions about why consumers have not seen meaningful price reductions following GST implementation. One of the key expectations of the reform was that replacing multiple tax layers with a unified GST structure would reduce the overall tax burden on goods and services, eventually translating into lower retail prices.
However, in practice, several commonly consumed products including noodles, bread, biscuits, fruit juice, and iced coffee have either remained at the same price or become more expensive. In some cases, bread prices reportedly increased by Nu 5 to Nu 10, while beverages such as juice and iced coffee have also seen price hikes despite adjustments in tax structures.
This has led to growing public confusion over whether tax savings are being passed on to consumers or absorbed elsewhere in the supply chain. Economists and policymakers have pointed to several possible factors influencing prices, including import costs, transportation expenses, fuel prices, exchange rate fluctuations, and broader business operating costs. These factors, they argue, often have a stronger influence on retail pricing in Bhutan than changes in domestic tax policy alone.
Radhi–Sakteng MP Tashi Tenzin at the National Assembly session on 14 May asked the question on market prices after GST implementation. Concerns were raised that prices had not reduced as expected and that monopolistic practices may be limiting consumer benefit.
Responding to the query the minister of Industry, Commerce and Employment, Lyonpo Namgyal Dorji said “that GST was expected to reduce prices for many goods, but emphasised that Bhutan operates within a market-driven pricing system”. He noted that the government’s ability to directly control prices is limited to specific sectors such as fuel and a small number of essential commodities. For most goods, prices are determined by market conditions and supply chain dynamics.
The minister also pointed out that while tax reductions may have occurred at the import or wholesale level, they are not always reflected at the retail level. This disconnect, he said, means that consumers may not be fully experiencing the intended benefits of the reform. The government has acknowledged that in some cases, retail pricing behaviour has not aligned with expected adjustments following GST implementation.
Concerns have also been raised about possible monopolistic behaviour and exclusive distributorship arrangements in Bhutan’s relatively small market. Critics argue that such structures can limit competition and allow certain suppliers to maintain higher prices. In response, Lyonpo Namgyal Dorji clarified that exclusive distributorship does not automatically constitute a monopoly if substitute products are available in the market. However, he said the government remains alert to unfair trade practices and is strengthening oversight mechanisms.
To address pricing transparency, the Competition and Consumer Affairs Authority has launched a Price Watch Programme covering major commercial centres including Thimphu, Phuentsholing, Gelephu, Mongar, Samdrup Jongkhar, and Trongsa. The programme tracks the prices of essential commodities and publicly shares findings to improve accountability and inform consumers.
At the policy level, the government is also advancing a Competition Bill aimed at strengthening Bhutan’s regulatory framework for market fairness. The proposed legislation is expected to provide legal mechanisms to investigate and penalise anti-competitive behaviour such as price fixing, cartel formation, and abuse of dominant market positions.
In parallel, authorities are working to ease confusion among wholesalers and retailers adapting to GST compliance. According to the ministry, regional revenue and customs offices have reached out to around 3,700 registered businesses to conduct awareness programmes and clarify procedural requirements. Joint monitoring by the Department of Revenue and Customs and the Competition and Consumer Affairs Authority has also begun to track the movement of goods from import points through distribution channels.
The transition to GST has also affected import-related regulatory processes. The Ministry of Industry, Commerce and Employment has deferred the full implementation of Bhutan Standards Bureau (BSB) certification requirements for imports. The decision was taken after concerns were raised that simultaneous enforcement of GST and stricter certification rules could disrupt supply chains, increase costs, and place additional pressure on small importers and retailers.
The ministry clarified that the purpose of BSB certification is not to restrict trade but to ensure that imported goods meet minimum quality and safety standards. However, given the timing of its introduction alongside GST reforms, the government opted for a phased approach to avoid unnecessary disruption in the market.
Overall, while GST remains one of Bhutan’s most significant fiscal reforms in recent years, its early performance highlights the challenges of implementing large-scale tax transitions in a small, import-dependent economy. The combination of lower-than-expected revenue collection and persistent concerns over retail pricing has placed pressure on policymakers to strengthen monitoring systems, improve communication with businesses, and ensure that consumers benefit more directly from the reform.
As the system continues to stabilise, the government maintains that improvements in compliance, economic activity, and administrative efficiency will gradually strengthen revenue performance. However, in the short term, GST remains under close public and parliamentary observation, with expectations high that the reform will eventually deliver both stronger revenue outcomes and fairer prices for consumers.
