The Department of Revenue and Customs (DRC) collected approximately Nu. 2.117 billion in Excise Tax revenue within four months of the implementation of the new tax regime under the Department of Revenue and Customs Goods and Services Tax (GST) framework. The excise tax was introduced on January 1, 2026.
According to officials from the DRC excise collections from January through April this year have primarily come from high-revenue product categories including fuel, vehicles, alcoholic beverages, aerated drinks, tobacco products, and pan masala and supari products.
The strong collection performance highlights the immediate fiscal impact of Bhutan’s broadened excise tax base, which now covers both imported and domestically manufactured excisable goods, marking a fundamental shift from the previous tax structure.
Prior to 2026, excise duty in Bhutan was imposed only on a narrow range of domestically manufactured products, largely alcohol produced by Army Welfare Project, while imported excisable products generally remained outside the excise net.
Similarly, vehicles and fuel were previously subject to Green Tax, operating separately from excise duty.
However, under the new GST-era framework, the excise tax base has expanded significantly. Products such as fuel, vehicles, tobacco, aerated beverages, pan masala, and imported alcoholic beverages now fall within the excise tax system, while the earlier Green Tax regime on fuel and vehicles has been phased out.
Officials say the sharp increase in revenue should not be interpreted simply as higher tax rates or rising imports, but rather as a result of broader product coverage and structural reforms in Bhutan’s indirect tax architecture.
“Direct comparison between the old and new excise collections would not present a fully accurate picture, as the scope, structure and coverage of the tax regime have changed fundamentally,” a DRC official said.
Despite the strong revenue performance, the DRC said it is currently not possible to determine which specific brands contribute the highest or lowest excise collections.
This is because import declarations are processed using the internationally standardized Harmonized System (HS) classification framework, under which products are classified according to commodity codes, descriptions, quantities and declared values rather than commercial brand names.
As a result, excise tax data is maintained on a product-category basis rather than by individual brands, makes or models.
Similarly, officials said excise incidence varies across product categories depending on policy objectives, public health considerations, environmental concerns, and revenue design under Bhutan’s Excise Tax Act, rather than country of origin alone.
As with any major tax transition, the initial implementation phase has presented several operational and compliance challenges.
According to the DRC, key issues observed so far include businesses and importers adjusting to the new GST and excise framework, classification-related challenges involving proper identification of excisable products under HS codes, monitoring of high-risk and high-revenue products, and ensuring consistent interpretation of tax provisions across customs checkpoints and regional offices.
The department noted that the complexity of administration has increased significantly as the new regime now covers both imports and domestic production.
Taxpayers, customs brokers and officials are also continuing to familiarize themselves with the digital systems supporting the reform, including the Bhutan Integrated Tax System and electronic customs management platforms.
However, officials described these challenges as transitional and typical of major tax reforms.
Beyond revenue generation, the government says the excise tax framework is designed to support broader economic and social policy goals.
These include encouraging healthier consumption patterns, discouraging excessive consumption of products with negative health or environmental impacts, improving fairness and transparency in indirect taxation, and modernizing tax administration through digital platforms.
Officials say the overall implementation has remained stable in the first four months, with the DRC continuing stakeholder consultations, awareness programs, system upgrades, and compliance monitoring to ensure the long-term effectiveness of Bhutan’s new excise tax regime.
For Bhutan’s fiscal policymakers, the Nu. 2.117 billion collected so far offers an early indication that the country’s ambitious tax modernization agenda is beginning to translate into tangible revenue gains.
Sangay Rabten, Thimphu
