As Bhutan enters the first week of the Goods and Services Tax (GST) implementation, the Bhutan Chamber of Commerce and Industry (BCCI) has submitted a set of strategic recommendations to the Prime Minister’s Office (PMO), urging the government to introduce transitional relief measures to ease the challenges faced by various business sectors ahead of the implementation of the GST.
The proposals aim to mitigate issues related to double taxation, cash flow constraints, administrative burdens, and competitiveness, especially for small and medium enterprises (SMEs), among others.
The proposal submitted by the Chamber, emphasizes the need for the government to consider waivers, deferments or adjustments of the 5% GST on existing inventories procured under the previous Bhutan Sales Tax (BST) regime. “Double taxation on the same stock will severely impact business cash flows and competitiveness,” the chamber has stated. “We urge the government to consider transitional relief measures that will allow businesses to clear their existing stock without undue financial burden.”
The chamber’s recommendations include extending deadlines for bonded warehousing and allowing GST collection at the point of sale instead of at entry points for vehicles. This, according to BCCI, would significantly help ease cash-flow issues faced by vehicle dealers and workshops.
“Implementing long-term bonded warehousing facilities or shifting the collection point to retail sales will provide much-needed relief and allow businesses to adapt gradually to the new tax system,” the Chamber had mentioned in the proposal. .
Another key suggestion from BCCI involves introducing a flexible GST filing regime tailored for small businesses. The chamber advocates for quarterly, half-yearly, or annual filing options based on turnover. “Many small businesses lack the ICT infrastructure and manpower resources to comply with frequent filings. Simplifying the process will promote compliance and ease the transition.”
BCCI also called for increased support in inventory reconciliation, especially for sectors like handicrafts, which rely largely on local sourcing and face difficulties in conducting inventory assessments. “Providing regulatory and practical support for inventory assessments during the transition phase will help businesses comply without undue burden,” the chamber stated.
Furthermore, the chamber recommended a temporary transition period until 2027 for sectors heavily impacted by GST, including tender-based supplies with significant pre-GST inventories. “A one-year waiver or transition period will give affected businesses time to adapt and avoid abrupt disruptions,” the proposal suggests
Addressing liquidity concerns, BCCI proposed measures for financial and banking support, such as credit facilities, relaxation of bank guarantee requirements, and measures to mitigate delays in government payments. “Cash flow constraints are a critical challenge, and providing targeted support will ensure smooth operations during this period,” the chamber has said.
The proposals came after a consultative meeting held by BCCI with business representatives from various sectors on 12th December, 2025, at their Thimphu office. During the meeting, concerns were raised by automobile dealers, ICT firms, hardware traders, handicraft artisans, and other allied sectors about the potential adverse impacts of GST.
The automobile sector, in particular, expressed fears of significant financial losses due to double taxation on existing stock and the high excise taxes already paid on inventory. One dealer highlighted that approximately 75 vehicles in stock could attract nearly Nu 10 million in excise taxes, while upcoming imports for 2026 could incur around Nu 40 million in taxes at entry points, intensifying worries over cash flow and profitability.
Automobile workshops and spare parts dealers shared similar concerns, revealing that they hold inventories purchased years ago, on which taxes have already been paid. They fear that under the new GST regime, they might be forced to sell their stock at a loss, especially as newer imports could be cheaper, creating unfair competition. The ICT and hardware sectors echoed these concerns, emphasizing that the imposition of additional taxes on their existing inventories would undermine their competitiveness and viability.
Similarly, the handicraft sector, largely dependent on local sourcing, voiced apprehensions about inventory assessment and the submission of detailed reconciled reports to the Department of Revenue and Customs (DRC). Artisans and craft businesses argued that such requirements would be challenging and irrational at the initial phase of GST implementation, demanding additional support to meet compliance standards.
Beyond sector-specific issues, business representatives highlighted broader challenges related to compliance and administrative burdens. Maintaining detailed records, issuing tax invoices, categorizing supplies, and filing regular returns require dedicated staff, IT systems, and resources, which many SMEs lack. They urged the government to provide additional support and capacity-building measures to facilitate compliance and prevent small enterprises from being unduly burdened.
Another pressing concern was the impact of GST on local manufacturing and tender-based supplies. Representatives warned that rising costs due to GST could undermine existing contractual arrangements and incentivize a shift toward cheaper imports, thereby negatively affecting domestic industries and the broader economy.
Meanwhile, the trading sector also raised issues related to cash flow and financing, noting that advance payments of GST and excise taxes at entry points, coupled with delays in government payments, could cripple their operations. Despite their critical role in the supply chain and contribution to GDP, the sector feels insufficiently recognized in national development initiatives like the Industrial Development Roadmap and the 10X National Industrial Vision.
Sherab Dorji
from Thimphu
