Despite a substantial reduction in taxes under the new Goods and Services Tax (GST) regime, retail prices of doma (betel nut) have increased across markets in Bhutan, driven mainly by sharp rises in import prices from India, according to a recent market analysis by the Competition & Consumer Affairs Authority (CCAA). According to the CCAA, “Even after the government reduced the tax rate on doma from 30% to 5%, prices at shops and markets have remained elevated. Our investigation found that the main reason is a rise in the cost of doma at the source—that is, in India from where doma is primarily sourced,” adding that, “As costs increase at the source, they transmit through each stage of the supply chain and are ultimately reflected in the prices consumers pay.”
The study further confirmed that the retail price increases are consistent with these higher supply costs. “We found no evidence of price-fixing, collusion, or coordinated pricing among retailers and no indication that traders are exploiting consumers through unjustified markups. The price increases appear to be driven by genuine and legitimate cost pressures and do not constitute a breach of competition or consumer protection laws,” the Authority reiterated.
The study examined price movements across the supply chain—from import to wholesale and retail levels—following the introduction of GST on January 1, 2026.
Under the previous tax regime, imported doma was subject to a 30% Bhutan Sales Tax (BST) at the point of entry. With the transition to GST, the tax rate was reduced to 5%, lowering the overall tax burden by 25 percentage points. The move was widely expected to result in a decline in retail prices for consumers.
However, the outcome has been notably different. “Contrary to expectations, retail prices of ready-to-consume doma have increased across all surveyed markets,” the report states, underscoring growing public concern over why the tax reduction has not translated into lower prices.
The analysis drew on data collected from 11 wholesalers and 17 retailers in Thimphu, comparing prices from December 2025—prior to GST implementation—with those recorded in March 2026.
Findings showed that the price increases originated at the source, with significant hikes in the cost of key doma ingredients imported from India. Mitta patta (betel leaf) recorded the highest increase at 32.62%, followed by dhoma nut at 19.70% and bangla patta (betel leaf) at 18.60% within just three months.
These figures were independently verified through consultations with exporters based in Jaigaon, West Bengal. Export data indicated even higher increases in some cases, with doma nut prices rising by an average of 27.36% and mitta patta by 34.27%.
“The magnitude and pace of these increases are significant for any commodity within such a short period,” the report notes.
Wholesale prices in Bhutan rose correspondingly, reflecting the higher cost of procurement. Doma nut prices increased by 17.67% at the wholesale level, while bangla patta rose by 21.55%, and mitta patta by 19.83%.
Retail prices followed the same trajectory, with increases ranging from 21.68% for cherry doma to as high as 27.35% for doma prepared with bangla patta.
The findings indicate that cost increases were passed through the entire supply chain, with little or no absorption by wholesalers or retailers.
The report attributes the price escalation largely to developments in the Indian market, from which Bhutan sources nearly all its areca nut and betel leaf supplies.
The CCAA highlighted that India has maintained a 100 percent import duty on areca nuts while also revising the Minimum Import Price (MIP) to Rs. 351 per kilogram. “These measures are aimed at protecting domestic farmers and stabilizing the local market but have had the effect of keeping prices high.”
At the same time, supply constraints have further tightened the market. The continued spread of Yellow Leaf Disease (YLD) in Karnataka—one of India’s major areca nut-producing regions—has reduced output, contributing to elevated prices.
While imports from countries such as Myanmar and Bangladesh have supplemented supply, their impact has been limited due to stringent phytosanitary controls and high import duties.
“Since Bhutan depends almost entirely on India for areca nut imports, Indian market conditions directly determine the cost structure for Bhutanese traders,” the Authority explained. As a result, Bhutanese prices closely track Indian domestic price movements, leaving limited scope for domestic price control.
The report also indicated that the intended benefits of the GST tax reduction have been fully offset—and in some cases exceeded—by rising import costs.
For instance, the combined price increase of doma nut and bangla patta averaged around 19.25%, while the combination with mitta patta saw an increase of approximately 26.16%.
“The tax benefit to consumers has effectively been neutralized by cost-push pressures originating at the source,” the report clarified.
Importantly, the study finds little evidence to suggest price manipulation or profiteering within Bhutan’s domestic market.
The doma trade is described as a highly liberalised and competitive sector, with numerous participants across import, wholesale, and retail levels. The broad and uniform nature of price increases across markets further reduces the likelihood of collusion.
Instead, the report points to pricing behaviour in source markets as a more plausible explanation.
“It is an expected phenomenon that exporters adjust prices upward when they anticipate tax reductions in destination markets, particularly for commodities with strong and relatively inelastic demand,” the report remarked.
The findings call attention to the complexity of translating tax reforms into consumer price benefits in an import-dependent economy like Bhutan. To address the issue, the report recommended several policy measures.
First, it calls for strengthened monitoring of import prices by relevant agencies. Establishing a system to benchmark import prices against Indian wholesale and international reference prices could help detect abnormal mark-ups.
Second, the report recommends clearer communication on GST pass-through expectations. “Authorities should provide guidance to traders while also informing the public when price increases are driven by external factors rather than domestic practices,” it stated.
Third, the study highlights the need for supply diversification. Bhutan’s heavy reliance on India exposes it to external shocks, and exploring alternative sources such as Myanmar, Bangladesh, and Sri Lanka could help mitigate this vulnerability over the medium term.
Fourth, the report suggests institutionalizing periodic price surveys across the supply chain to support evidence-based policymaking and early detection of price anomalies.
Finally, it emphasizes the importance of consumer awareness. “Transparent communication from regulatory bodies can help address public concerns and sustain confidence in the market,” it asserted.
The doma price surge illustrates a broader economic challenge: aligning domestic policy objectives with external market dynamics. While GST reforms aim to reduce costs and improve affordability, their effectiveness can be constrained by factors beyond national control—particularly in sectors heavily reliant on imports.
For Bhutan, where doma consumption remains widespread and culturally ingrained, the issue carries both economic and social significance through a balanced policymaking.
Tashi Namgyal
From Thimphu
