The government has publicly clarified that residential house rent is not subject to Goods and Services Tax (GST), easing concerns among tenants and property owners following the rollout of the new tax regime.
According to the Ministry of Finance (MoF) and the Department of Revenue and Customs (DRC), the leasing or renting of a residential dwelling used solely for private residence is an exempt supply under the Goods and Services Tax Act of Bhutan 2020.
“As per Schedule IV of the GST Act, residential house rent is clearly classified as an exempt supply. This means no 5 percent GST is chargeable on residential rentals used for private living,” a senior official from the DRC said.
The clarification follows reports of confusion in some urban centres, where tenants were asked to pay GST on house rent after the introduction of GST. Authorities stressed that such charges are not permitted under the law.
However, officials also clarified that while landlords are not required to charge GST on residential rent, they are not eligible to claim input tax credit on expenses related to the rented residential property. These include costs incurred for repairs, maintenance, renovations, and related services.
“Since residential rent is exempt from GST, landlords cannot claim input tax credit on expenses associated with that property. This is consistent with standard GST principles,” the official explained.
Schedule IV of the GST Act of Bhutan 2020 lists supplies and imports that are exempt from GST. These include the supply of immovable property used for agricultural purposes; lease, license, hire, or other forms of supply granting the right to occupy and reside in residential premises; and sale of residential property, excluding the first sale of newly constructed houses or properties occupied for less than two years.
Tenants have welcomed the clarification, saying it provides much-needed certainty.
“We were worried that rent would increase overnight because of GST. This clarification is a relief for families already struggling with high living costs,” said Kunzang Thinley, a resident of Thimphu.
Landlords, while acknowledging the exemption, noted the implications on maintenance costs.
“Not charging GST is clear, but we also cannot claim tax credits on repairs. Still, clarity is better than confusion,” said Tshering Phuntsho, a property owner in Phuentsholing.
The MoF urged the public to refer to the GST Act and official notifications, and advised tenants and landlords to report any instances of incorrect GST charging on residential rent.
“The GST system is new, and some misunderstandings are expected. We will continue to issue clarifications and conduct awareness programmes to ensure smooth implementation,” the official added.
The government reiterated that residential house rent used purely for private residence remains GST-exempt, and any deviation from this provision is not in line with the law.
Tashi Namgyal
From Thimphu
