The Finance Minister announced relief for car buyers and lobbied for a health-conscious tax system
TIL BDR GHALLEY
Thimphu
In what could bring relief to many Bhutanese families dreaming of owning a car, the government is preparing to reduce taxes on small and medium-sized vehicles under the upcoming Excise Tax Bill 2025.
Finance Minister Lekey Dorji announced the proposal during the National Assembly’ yesterday, saying the move aims to make vehicles more affordable for ordinary citizens especially those in the lower and middle-income brackets.
If approved, the new bill would lower taxes by about 9 to 10 percent on small and medium-sized cars. For instance, a popular model like the Alto, currently priced at Nu 840,793 with 100 percent tax, could become Nu 84,000 cheaper.
The Department of Revenue and Customs (DRC) projects that the price could drop to Nu 796,877, which translates to around a 6 percent reduction.
Taxes on cars imported from India will now be based on the Free on Board (FOB) value instead of the existing Cost, Insurance, and Freight (CIF) value.
In simpler terms, this means taxes will be applied only to the cost of the car itself excluding transport and insurance thereby bringing down the overall taxable amount.
The announcement followed concerns raised by Wamrong MP Lam Dorji, who noted that vehicle ownership is becoming increasingly unaffordable due to high import taxes, despite the growing necessity of private transport amid inefficient public transportation.
He asked whether the government had plans to reduce taxes to make vehicles more accessible.
Responding, Minister for Finance Lekey Dorji said, “The government is implementing tax reforms through the Excise Tax Bill 2025, with the goal of encouraging eco-friendly vehicles to promote environmental sustainability, discouraging high-powered, fuel-intensive vehicles, and taxing heavy vehicles more due to their environmental impact.”
Gangzur-Minjey MP Loday Tsheten also highlighted rising vehicle prices and questioned whether the government is addressing high dealer profit margins.
In response, the minister said a government committee reviewing vehicle pricing found that some dealers were collecting green taxes from customers but remitting less to the government.
While direct price control may not be feasible, Lyonpo said the government will rely on consumer groups and the media to hold dealers accountable.
“Empowering buyers and institutions like the Competition and Consumer Affairs Authority (CCAA) is key to ensuring that tax benefits are passed on to consumers,” he said.
A new system will allow the Bhutan Construction and Transport Authority (BCTA) to access data on taxes paid at the point of entry in Phuentsholing.
While the bill aims to ease the cost of vehicle ownership, it also takes a tough stance on products that harm health and the environment particularly alcohol, tobacco, sugary drinks, and pan masala.
Under the Excise Tax Bill, the tax on alcohol will be calculated based on the amount of pure alcohol content in the beverage, rather than its total volume. This applies uniformly to both imported and locally produced alcohol.
According to the bill, one liter of pure alcohol (100% alcohol content) will be taxed at Nu 1,200. This equates to Nu 12 for every 1% of alcohol content.
For instance, the Department of Revenue and Customs (DRC) conducted a pricing analysis. A 750 ml bottle of Bhutan Grain Highland Whisky, which contains 42.8% alcohol, currently retails for Nu 325.
The pure alcohol content in this case is approximately 321 ml. Multiplying this by the Nu 1,200 per liter rate results in an excise tax of Nu 385.
Assuming all other costs remain constant, the retail price of Highland Whisky would increase from Nu 325 to Nu 643.
This means that beverages with higher alcohol content such as whisky, rum, and vodka will experience more significant price increases.
The intent behind this taxation model is to discourage excessive consumption by making stronger alcoholic drinks more expensive.
Beer, on the other hand, will see a smaller price hike due to its lower alcohol content. For example, a 500 ml can of Druk 11,000 with 8% alcohol will go up in price from Nu 65 to Nu 90.
To illustrate further the price of a pack of 20 Gold Flake sticks will rise from Nu 300 to Nu 420, as each stick will be taxed Nu 10.
Pan Masala such as Himgold, Shikhar, Rajnigandha for an instance a 17-gram Rajnigandha packet will increase from Nu 80 to Nu 110, as a Nu 2,000/kg tax is introduced.
Unlike the previous Excise Equalization Tax (EET) that included over 157 items from noodles to juices the proposed bill avoids taxing daily essentials. Instead, it focuses on items with proven negative health and environmental impacts.
The Finance Ministry clarified that the reform is designed to promote healthier consumption patterns, improve environmental outcomes, and provide financial relief to average citizens.
