In a major step toward modernizing the nation’s taxation system, the Regional Revenue and Customs Office (RRCO) in Phuentsholing has announced that Sales Tax collection on all goods and services will officially cease from 1st January 2026. The move follows a directive issued by the Department of Revenue and Customs (DRC) on 1st December 2025, marking the first step towards a complete shift to the Goods and Services Tax (GST) regime.
According to the notification issued to all Sales Tax Collecting Agents (STCAs) by the department, no Sales Tax shall be levied or collected from customers once GST comes into effect. The transition aligns with Schedule X, Section 4 of the Goods and Services Tax Act of Bhutan 2020, which states that “Sales Tax shall not be payable on an import, sale, or other to the extent that it is subject to GST.”
Bhutan’s Sales Tax regime, introduced decades ago, imposed different tax rates on selected goods and services at the point of sale. However, the system often resulted in fragmented tax structures, compliance challenges, and inefficiencies in monitoring.
The GST—a modern, destination-based tax—aims to streamline and harmonize taxation by replacing multiple taxes with a single nationwide levy. Under GST, taxes are applied uniformly, improving transparency, reducing cascading effects, and strengthening revenue administration.
A DRC official explained the shift: “GST is designed to simplify taxation and create a more efficient and transparent system. Ending Sales Tax is a crucial part of this reform.”
While members of the business community have expressed mixed feelings, there is general optimism about the transition. A wholesaler in Phuentsholing said, “We expect GST to bring long-term clarity in pricing. Earlier, Sales Tax rates were different for different items, and it often confused customers. GST should fix that.”
Similarly, a retail store owner in Thimphu, Pema Wangdra shared concerns about adjusting to the new system but acknowledged its benefits. He said, “The initial months may be challenging as we adapt to new procedures. But overall, GST will make accounting cleaner and more predictable.”
RRCO Phuentsholing has issued several important directives as part of the transition, including the end of Sales Tax collection from 1st January 2026.
For record filing and system closure, all outstanding filings and collections must be updated by 31st December 2025. Filing for December 2025 must be completed by 10th February 2026, and the RAMIS system will remain active for pending Sales Tax–related updates.
“We urge all collecting agents to complete their record updates on time to prevent any administrative challenges during the transition,” a regional official reiterated.
On pre-GST transactions, supplies made before 1st January 2026 will continue to be processed under existing Sales Tax rules. For pending cases, all appeals, refunds, and recoveries related to Sales Tax will continue under the Sales Tax Exit Strategy.
Under fiscal incentives, Sales Tax exemptions previously granted will no longer apply once GST begins. However, any transaction prior to GST will still receive due facilitation.
Another business representative from the construction supply sector said that
for businesses like theirs that rely heavily on imports, GST is expected to streamline tax payments at the border and reduce delays. “If implemented well, it will boost overall efficiency,” she added.
All pending Sales Tax liabilities—except those under approved installment plans—must be cleared by 31st December 2025. Returns for November and December 2025 must be filed by 10th January 2026 and 10th February 2026, respectively.
“The cooperation of all Sales Tax collecting agents is essential to ensure a smooth, efficient, and disruption-free transition from the Sales Tax regime to the GST framework,” explained the Regional Director of RRCO Phuentsholing, Choki Gyeltshen, emphasizing timely compliance.
The shift is expected to bring greater uniformity in taxation, reduce administrative burden on businesses, and enhance efficiency in government revenue collection. For consumers, GST is anticipated to streamline pricing and remove overlapping tax components.
With the formal discontinuation of Sales Tax, Bhutan now moves fully into a modern, unified taxation system, marking a significant milestone in the country’s fiscal reforms.
Tashi Namgyal
From Thimphu
