Finance Minister proposes to defer GST implementation

According to the minister, it is not right to introduce the GST at this time since it would have a negative impact on commercial organizations and the general population

The National Assembly proposed deferring the Bhutan Goods and Services Tax (GST) Amendment Bill 2022 on June 8. The GST was supposed to go into effect on July 1, 2022.

Finance Minister Namgay Tshering, who is in charge of the Bill, stated that the revision is being proposed to postpone Bill’s implementation date from July 1, 2022, to July 1, 2024.

According to the minister, the proposal to defer the Bill is also due to the economic situation of the country and the operational readiness of the Bhutan Integrated Taxation System (BITS). With the COVID-19 pandemic and the country relying on imports, the finance minister said the economic situation is badly affected and that the Russia-Ukraine war has further aggravated the economic situation.

“The country’s economy is in contraction and the recovery of the economy to its normal situation would take some time,” the minister added.

Highlighting that the country has one of the highest inflation rates in the world (8.15 percent in 2021 and 7.91 percent in 2022), the minister said, “It is not right to introduce the GST at this time since it would have a negative impact on commercial organizations and the general population.”

Lyonpo Namgay Tshering also informed the House that the BITS is one of the crucial components for GST’s successful implementation and its development has been outsourced to the Thimphu TechPark Limited (TTP).

The contract with TTP was terminated since they were unable to supply the required BITS solution and the deployment of a new vendor for the BITS development, as well as the system’s entire delivery, is expected to take at least two years.

The minister further informed the House that while registration and taxation aspects are complete, tax compliance and evasion aspects are not.

According to the finance minister, Nu 30mn was given to external experts from the Nu 500mn approved budget for IT Park-Armenia.

Expressing support for the Bill, MP (Dr) Pasang Dorji from the Bartsham-Shongphu constituency asked the minister whether the government will pass the GST Bill within two years.

The MP also inquired about the government’s digital unpreparedness, costs associated with job cancellation, and the availability of possible contractors.

MP Ugyen Dorji from the Dramedtse-Ngatshang constituency also raised concerns about digital unpreparedness.

“How come the administration couldn’t gather experts and digitally isn’t ready for GST?” the MP inquired.

“Members of the House have requested that the implementation be extended until 2023, but the debate on GST keeps coming up as an agenda item in the Parliament,” he said, recommending indefinite deferment.

Prime Minister Dr Lotay Tshering said that the government is technologically prepared for the GST implementation, but not with a secure system.

The Prime Minister suggested either omission or prolonged deferral.

The finance minister stated that the system may be implemented when it is ready to benefit everyone and favored indefinite deferment.

Meanwhile, the Speaker concluded that indefinite deferral of Bills, unlike ordinary bills, is not suitable. It was then referred to the Legislative Committee for additional consideration in preparation for the second reading on June 20.

Sangay Rabten from Thimphu