As Bhutan rolls out its Goods and Services Tax (GST) regime, a critical misunderstanding is rippling through retail markets — and it could be costing consumers more than they should pay. Economists, tax authorities, and industry experts are issuing a strong and unified message: GST must not be charged on the Maximum Retail Price (MRP). Doing so, they warn, amounts to double taxation and unfairly burdens the public.
To understand the impact, consider a product labeled with an MRP of Nu 100 under an 18 percent GST bracket. That Nu 100 already contains Nu 18 in GST. Charging an additional 18 percent at checkout inflates the price beyond the legal cap — and beyond fairness.
Professor Charan Singh, CEO and Founder Director of India’s EGROW Foundation and a respected authority on economic policy, is unequivocal. GST, he explains, is meant to be embedded in the final price reflected in the MRP. Adding tax again is not only incorrect — it distorts the very transparency GST is designed to bring. “Charging GST on MRP is double taxation,” he cautions, emphasizing that such practices undermine consumer trust.
A Bhutanese economist reinforces this view, stressing that GST applies only to the actual selling price, not the printed MRP. He adds a crucial compliance point: any retailer charging GST must issue a proper invoice. Without documentation, the tax collection itself becomes questionable. “If there’s no invoice, GST should not be charged,” he says, highlighting accountability as a pillar of the system.
However, market behavior suggests uneven understanding. Consumers report encountering retailers who add GST on top of MRP, creating confusion and suspicion. Tshewang Lhamo, a shopper in Thimphu, says she has heard of multiple instances where customers are being charged beyond the labeled price. “People don’t always know what is right,” she notes — a knowledge gap that leaves room for misuse.
In Samtse, Sanjana Dhal observes that prices have climbed since GST implementation but admits uncertainty over how taxes are being applied. Her expectation is straightforward: GST should be calculated on the cost of goods plus a reasonable margin — not piled onto MRP.
Encouragingly, many retailers are applying the rules correctly. Tandin Wangdi, a shopkeeper in Bumthang, explains that GST is calculated on his purchase price and profit margin. The challenge, he says, lies in explaining pricing logic to customers who fixate on the printed MRP. Transparency in communication, he believes, is just as important as compliance.
Official clarification leaves no room for doubt. Kuenzang Thinley, Collector at the GST and BITS Project Office under the Department of Revenue and Customs (DRC), states firmly that GST must never be levied on MRP. “At no stage should the selling price exceed the MRP,” he emphasizes, underscoring that the law protects consumers from overcharging.
Despite transitional confusion, some retailers remain optimistic about GST’s long-term impact. With revised tax slabs and streamlined processes, there is hope that efficiencies will translate into more competitive pricing. For shopkeepers like Tshewang Lhamo, GST represents an opportunity to pass savings to customers — once implementation stabilizes.
The stakes extend beyond individual transactions. Misapplication of GST risks eroding public confidence in a system designed to simplify taxation and enhance fairness. Authorities stress that education — for both traders and consumers — is essential. Understanding how GST interacts with MRP is not a technical detail; it is a consumer right.
As Bhutan’s GST framework matures, vigilance and clarity will determine its success. The message from experts is loud and clear: MRP is the final ceiling price, GST included. Anything more is not just a pricing error — it is a breach of principle.
For consumers, awareness is power. For retailers, compliance is responsibility. And for the system, trust is everything.
Sangay Rabten
From Thimphu
