As Bhutan rolled out the Goods and Services Tax (GST) on 1 January 2026, automobile dealers are raising alarm over what they call a looming “triple taxation” crisis, following the government’s firm stance that green tax paid in 2025 will not be refunded.
Dealers are urging the Ministry of Finance (MoF) to either refund the green tax already paid or adjust it against the new 5 percent GST, warning that failure to act could impose an unfair financial burden on the industry. However, the Department of Revenue and Customs (DRC) has categorically ruled out any possibility of a refund.
“There is no way the government can refund the green tax,” said Pema Wangdi, Head of the Revenue Intelligence Division under the DRC, during the launch of GST. “There is no lawful scope for a refund because the transaction has already been completed. The vehicles were imported, and the green tax was duly paid.”
He added that reversing the tax would set a dangerous precedent. “If the government refunds the green tax today, what happens if we decide to impose excise duty tomorrow? Dealers would not be willing to comply. The tax regime has changed, and refunds are simply not applicable.”
The concern stems from the fact that many dealers had already paid a 10 percent green tax on imported vehicles in 2025, believing it would remain part of the existing tax structure. With GST now replacing green tax, dealers argue they are being penalised for complying early.
“Government should either refund the green tax we have already paid or waive the 5 percent GST on these vehicles,” said Ugyen Dorji, Regional Manager of Mahindra Bhutan (Singye Agencies), during a stakeholder meeting organised by the Bhutan Chamber of Commerce and Industry on 12 December 2025. Other dealers echoed the sentiment, warning of severe financial strain if corrective measures are not introduced.
Compounding the issue is the government’s decision to discontinue the warehouse facility for vehicle dealers under the GST regime. Previously, licensed dealers could register as Warehouse Operators, allowing them to defer payment of customs duty, green tax, and other taxes until vehicles were sold or removed from storage.
The facility had been a critical financial cushion, enabling dealers to manage cash flow, payroll, and inventory costs, especially during sluggish market conditions.
“Without a refund, the least the government can do is continue the warehouse system,” said Ugyen Dorji. “Removing it now leaves dealers with no way to recover the green tax already paid and puts our liquidity at serious risk.”
Bhutan introduced the green tax on motor vehicles in 2012, later expanding it to include fuel, heavy machinery, and equipment. The expansion, formalised under the Tax Acts of 2014 and 2022, was intended to internalise environmental costs and curb pollution.
With the introduction of GST, the green tax will be fully replaced—leaving dealers who paid the tax just months earlier caught in a costly transition gap.
As GST implementation draws closer, dealers warn that unless the government revisits its position, the shift could undermine business confidence and disrupt Bhutan’s already fragile automobile market.
Sangay Rabten
From Thimphu
