The number of businesses registering under Bhutan’s Goods and Services Tax (GST) system has shown signs of stagnation, prompting the Department of Revenue and Customs (DRC) to call for greater compliance among eligible entities.
As of January 14, 2026, a total of 3,829 businesses were registered under the GST regime. While the figure reflects steady progress since the rollout of the tax system, officials say the pace of new registrations has slowed in recent months, raising concerns about gaps in compliance.
The DRC attributes part of the slowdown to an ongoing data refinement exercise, which has led to the removal of entities that do not meet the criteria for GST registration.
Kuenzang Thinley, Commissioner of the BITS and GST Project, said that the department has been cleaning up its database to ensure that only eligible, commercially active businesses remain registered.
“After segregating the data, we have removed non-commercial registrants, such as those earning only rental income. This has affected the overall growth in numbers,” he said. “However, we expect more businesses to register as awareness improves and the transition to GST continues.”
Despite this adjustment, the DRC believes that a significant number of businesses that meet the legal threshold for GST registration have yet to come forward. The department has urged these entities to comply without delay, warning that enforcement measures will be strengthened.
Under the GST Act of Bhutan 2020, businesses are required to register if their annual turnover exceeds Nu 5 million. Registration must be completed within 30 days following the month in which the threshold is reached.
The law also outlines additional criteria for registration. Businesses may be required to register if their turnover reaches at least half the threshold within a six-month period or if they are projected to exceed the Nu 5 million mark within the next 12 months.
In cases where a business fails to register despite meeting the criteria, the DRC has the authority to enforce compliance. The department can issue notices or proceed with compulsory registration on behalf of the entity.
Non-compliance carries clear financial and legal consequences. According to the Goods and Services Tax Rules 2026, failure to register attracts a penalty of Nu 10,000 for a first offence. Repeat violations may lead to prosecution under GST offence provisions.
Penalties are significantly higher for misrepresentation. Businesses that falsely claim GST registration status or incorrectly present prices as inclusive of GST can face fines ranging from Nu 50,000 to Nu 1 million.
Beyond registration, compliance challenges are also evident in the filing of GST returns.
The DRC reports that around 430 registered businesses have yet to submit their GST returns, despite repeated reminders. These businesses have been urged to file their returns through any of the department’s eight regional offices to avoid further penalties.
At the same time, nearly 500 registered entities have filed zero returns, indicating that they recorded no taxable transactions during the reporting period. While such filings may be legitimate for certain businesses, officials say the figures warrant closer monitoring to ensure accuracy and prevent misuse.
Among businesses that have filed returns, compliance patterns vary. More than 1,300 businesses reported debit returns—where the GST collected on sales exceeds the GST paid on purchases—resulting in a net tax liability payable to the government.
In contrast, around 1,080 businesses submitted credit returns, reflecting situations where input tax credits exceed output tax liabilities. These credits may be carried forward to future periods or refunded in accordance with GST regulations.
Revenue figures show that GST is steadily becoming an important source of domestic income.
As of March 11, 2026, total GST collection stood at Nu 1.552 billion. The bulk of this—Nu 1.314 billion—was generated from imports at key entry points such as Phuentsholing and Gelephu, highlighting Bhutan’s continued reliance on trade-related taxation.
Domestic GST collections accounted for Nu 229.5 million, while government services contributed Nu 9.16 million.
Officials say the current composition of GST revenue reflects the structure of Bhutan’s economy, where imports play a dominant role. However, they emphasize that improving domestic compliance will be critical to strengthening internal revenue generation over time.
The DRC maintains that a combination of awareness campaigns, stricter enforcement, and simplified processes will be essential to improving compliance levels.
Efforts are ongoing to educate businesses about their obligations under the GST system, while also enhancing digital systems to make registration and filing more accessible.
At the same time, the department is stepping up monitoring and enforcement to ensure that businesses operating above the threshold are brought into the tax net.
The stagnation in GST registrations underscores the challenges of transitioning to a modern tax system, particularly in an economy with a large number of small and informal businesses.
However, officials remain optimistic that with continued outreach and enforcement, compliance levels will improve.
Strengthening GST implementation is seen as a key step toward enhancing Bhutan’s domestic revenue mobilisation, reducing dependence on external sources, and supporting long-term fiscal sustainability.
Sangay Rabten
From Thimphu
