Bhutan’s Goods and Services Tax (GST) system generated Nu. 4.9 billion in net revenue during the first half of 2026, signalling steady progress in revenue mobilisation as authorities continue efforts to strengthen compliance under the country’s new indirect tax framework.
According to the Department of Revenue and Customs (DRC), GST implementation initially presented challenges as businesses adjusted to new tax requirements, accounting procedures and reporting obligations. However, compliance has improved significantly following extensive awareness programmes, technical support and taxpayer engagement initiatives.
The transition to GST required businesses across the country to revise their financial systems, understand new filing procedures and adapt their operations to meet the requirements of the new tax regime. During the early stages, these adjustments resulted in difficulties related to timely filing, accurate declarations and proper tax payments.
To address these issues, the DRC carried out extensive taxpayer outreach, awareness campaigns, training programmes and technical guidance to support businesses in understanding and fulfilling their GST obligations.
The Department said these interventions have helped improve compliance, with the majority of taxpayers now meeting their GST responsibilities in accordance with the law.
Despite the progress, the DRC continues to identify cases of non-compliance through verification mechanisms and risk-based compliance programmes. Common issues detected include under-reporting of taxable transactions, incorrect GST declarations and errors in tax filings.
Where violations are identified, the Department said corrective measures are being implemented in line with existing tax laws. These include tax assessments, audits, recovery of unpaid taxes and enforcement actions against non-compliant taxpayers.
Looking ahead, the DRC plans to further strengthen its compliance framework through improved data analytics, wider third-party information matching, targeted audits and continued taxpayer education.
Officials said these measures are intended not only to improve revenue collection but also to encourage voluntary compliance and ensure that Bhutan’s GST system remains fair, transparent and efficient.
The Department has also urged taxpayers to maintain accurate financial records, properly report taxable transactions and fulfil their GST obligations, emphasising that compliance is essential for building a sustainable tax system.
Meanwhile, the DRC has clarified that it cannot currently provide a consolidated figure for GST collections from the overall services sector due to the way economic activities are classified under the national reporting system.
Responding to questions regarding GST revenue generated from the services sector, including specific industries such as hotels, the Department explained that taxpayers and economic activities are categorised according to the Bhutan Standard Industrial Classification (BSIC) 2020.
Under the BSIC framework, economic activities are divided into 21 standard sections, and there is no single category officially designated as the “services sector.”
The DRC explained that activities generally considered part of the services economy—such as accommodation and food services, transportation and storage, financial and insurance activities, information and communication, education, healthcare and professional services—are classified separately under different BSIC sections.
Because of this classification structure, the Department said a total GST figure for the services sector cannot be generated unless the specific BSIC categories to be included are clearly defined.
Similarly, GST collections from individual industries, including hotels, are not maintained as separate standalone categories. Instead, they are recorded under their respective industrial classifications.
The Department said it is currently compiling detailed GST collection data based on industrial classifications. Once completed, the information will be published through the Department’s Revenue Report, providing a more detailed understanding of how different sectors contribute to GST revenue.
The release of sector-wise GST data is expected to provide greater transparency on the contribution of various industries to government revenue and help policymakers, businesses and stakeholders better understand the economic impact of the new tax regime.
The introduction of GST represents one of Bhutan’s most significant reforms in tax administration, replacing the previous sales tax framework with a broader value-added consumption tax system designed to improve efficiency, transparency and revenue mobilisation.
While the initial transition required businesses and taxpayers to adjust to new systems, the steady collection of Nu. 4.9 billion in the first six months of 2026 indicates that the system is gradually stabilising.
As compliance mechanisms become stronger and data systems improve, GST is expected to play an increasingly important role in strengthening domestic revenue, supporting public expenditure and reducing reliance on external sources of financing.
Sangay Rabten, Thimphu
