𝐃𝐑𝐂 𝐏𝐥𝐚𝐧𝐬 𝐒𝐢𝐦𝐩𝐥𝐢𝐟𝐢𝐞𝐝 𝐆𝐮𝐢𝐝𝐞𝐬 𝐚𝐧𝐝 𝐒𝐮𝐩𝐩𝐨𝐫𝐭 𝐏𝐫𝐨𝐠𝐫𝐚𝐦𝐦𝐞𝐬 𝐚𝐬 𝐆𝐒𝐓 𝐁𝐫𝐢𝐧𝐠𝐬 𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐒𝐞𝐜𝐭𝐨𝐫 𝐈𝐧𝐭𝐨 𝐓𝐚𝐱 𝐍𝐞𝐭

… 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒏𝒐𝒘 𝒕𝒂𝒙𝒆𝒅 𝒖𝒏𝒅𝒆𝒓 𝑮𝑺𝑻, 𝒓𝒂𝒊𝒔𝒊𝒏𝒈 𝒄𝒐𝒎𝒑𝒍𝒊𝒂𝒏𝒄𝒆 𝒂𝒏𝒅 𝒄𝒐𝒔𝒕 𝒄𝒐𝒏𝒄𝒆𝒓𝒏𝒔 𝒘𝒉𝒊𝒍𝒆 𝒂𝒖𝒕𝒉𝒐𝒓𝒊𝒕𝒊𝒆𝒔 𝒊𝒎𝒑𝒍𝒆𝒎𝒆𝒏𝒕 𝒎𝒊𝒕𝒊𝒈𝒂𝒕𝒊𝒐𝒏 𝒎𝒆𝒂𝒔𝒖𝒓𝒆𝒔

By Yeshi Dolma 

The rollout of the Goods and Services Tax (GST) is increasingly drawing attention to the service sector, where many businesses are encountering sales taxation for the first time. While earlier debate concentrated on goods, policymakers now acknowledge that services, previously taxed only in limited areas such as tourist-rated hotels, restaurants, and cable television, are experiencing the most significant adjustment under the new framework.

Explaining the logic behind the reform, Sonam Jamtsho, Director General of the Department of Revenue and Customs (DRC), said, “Under the new tax framework, services are now taxed in the same way as goods. Previously, only sectors such as cable television and tourist standard hotels were taxed, but now all services fall under GST.”

He added that the authorities deliberately began with a low rate, noting, “We began with a 5 percent rate on both goods and services, which, when compared internationally, is among the lowest in the world.”

He said the objective was to ensure fairness across the economy. “Transactions in goods and services drive the economy, and taxing only goods would be unfair,” Jamtsho said.

Despite the rationale, the early months of GST have unsettled parts of the service sector. Many businesses say the tax has raised prices by 5 percent while creating new compliance costs, particularly for firms without full-time accountants. Others fear that being registered could cost them clients, as smaller operators below the threshold do not have to charge GST.

Jamtsho said the department did not expect compliance costs to escalate sharply. “While services may become more expensive, compliance costs are not expected to rise significantly, as even small entrepreneurs understand basic cost–benefit analysis and record-keeping requirements under the reform,” he said.

Early experience, he added, suggested the system was beginning to function. “Since GST was introduced just a month ago, we are already seeing initial calculations being filed, and tax calculators indicate that the system is easier to use.”

He also sought to counter concerns about competition from unregistered firms. “There is a perception that unregistered service providers will lose business to registered firms, but this is not necessarily true, as customers decide not only on price but also on quality and trust,” he said, adding that as GST becomes embedded, “unregistered businesses are also expected to naturally reach the Nu. 5 million turnover threshold, which is one of the strengths of the system.”

The DRC says several mitigation measures are already in place to cushion smaller firms during the transition. Jamtsho pointed to the turnover threshold as a first line of relief. “Recognising that the transition has created some discomfort in the market, the Ministry of Finance and the Department of Revenue and Customs have introduced mitigation measures,” he said.

“Businesses with turnover below Nu. 5 million can avoid registration for now, giving them time to grow toward that threshold.”

For companies that do cross the line, reporting requirements have been eased. “Once they cross it, they will only need to submit monthly accounts rather than daily records,” he said.

He added that further assistance is being prepared: “The Department is also planning simplified guides and support programmes, including help desks, as well as transitional and monetary support. These measures will ultimately strengthen the economy in the long run.”

Alongside these assurances, the DRC has released early figures on GST registration and digital connectivity, saying that all businesses falling within the GST cap have already been registered. As of 3 February 2026, there were 3,607 GST taxpayers nationwide, excluding government agencies, with 2,671 already linked to the online system.

Thimphu accounted for the largest share, with 1,858 registered taxpayers, 1,396 of whom were web-linked. Phuntsholing followed with 580 registered and 466 online. Paro recorded 284 GST taxpayers and 253 web-linked users, while Mongar showed particularly high digital uptake, with 183 of its 193 taxpayers already connected. Bumthang had 99 registered taxpayers and 46 online, Gelephu 245 and 92, Samdrup Jongkhar 177 and 120, and Samtse 171 registered, with 115 linked to the platform.

The department says the figures highlight how implementation is progressing alongside outreach efforts. With simplified guides, sector-specific training, help desks, and transitional support being rolled out, the DRC is aiming to reduce friction for service providers as the nation adapts to the new tax regime.

For policymakers, the message remains that GST is a long-term structural reform rather than a short-term revenue measure. While the initial months may be challenging for a service sector unused to broad-based sales taxation, the emphasis, according to the DRC, is on ensuring that the system becomes easier to navigate and more predictable as businesses gain experience with it.