What is GST?

Goods and Services Tax (GST) is a consumption-based tax that is applied to most goods and services in Bhutan. It is charged at a standard rate of 5 percent and is collected at the point where goods or services are consumed. Under GST, the tax burden is borne by the final consumer, while businesses collect the GST and remit to the government on behalf of the consumer. To avoid tax on tax, businesses are allowed to claim back the GST paid on their purchases or import through a mechanism known as Input Tax Credit. This ensures that the tax is levied only on the value added at each stage of the supply chain.

How GST works

• Destination-based: GST is collected where goods or service are consumed, not where it was produced.
• Value-added tax: GST is applicable only on the value added at each stage of the supply chain.
• Consumption Tax: GST is applicable only when goods and services are consumed by consumers.

Who charges and who pays?

• Registered businesses must charge 5% GST on their taxable goods and services , issue invoices, keep records, file returns, and remit the net GST amount to Government.
• Consumers pays GST when they consume goods and services.
• Businesses can claim Input Tax Credit for GST paid on purchase or import for business purposes (e.g., raw materials, equipment, fuel for business vehicles, professional services). GST paid on the Items not meant for business purposes do not qualify for ITC.

What is taxed—and what isn’t?

• Most goods and services: Taxed at 5%.
• Exports: For the exporters, GST is applicable at the rate of zero% and can claim ITC on the GST paid on their purchases.
• Exempt supplies (no GST charged): Some essential items like rice, edible oil, salt and core public services such as education (schools, colleges, universities) and healthcare (medical treatment, surgeries, dental care).

Note: Cosmetic procedures and private tuition are not exempt.

Why GST?

• Fair and transparent: Tax is paid where goods/services are consumed.
• No tax-on-tax: The input credit system prevents cascading taxes.
• Encourages compliance: Standardized invoicing and filing through the national portal support accurate records and easier audits.

Who Needs to Register for GST?
Businesses must register for GST if they meet certain turnover conditions. Registration ensures that they can charge GST on sales and claim input tax credits on purchases.

Compulsory Registration

• Any business with an annual turnover of Nu. 5 million or more must register for GST.

Turnover is calculated by:
 Adding the value of all supplies made in the course of business, plus                     The value of imported B2B services,
 Excluding sale of capital assets and disposal of a business as a going concern.

• For individuals:
  The turnover of all businesses owned by the person is combined.
  Jointly owned businesses are treated separately and must register if their turnover crosses the threshold.
• Voluntary Registration
• Businesses with an annual turnover of Nu. 2.5 million or more but less than Nu. 5 million may choose to register voluntarily.

Conditions:

• The business is engaged in economic activity.
• The Department is satisfied that the business can comply with GST obligations.

Once registered:

• They must remain registered for at least two years (unless allowed otherwise).
• They must comply with all GST rules like compulsory registrants.

Group Registration

Two or more related businesses may apply to register as a GST group if:

• They are controlled by the same person, partnership, or company.
• They meet conditions such as being resident in Bhutan, having the same tax period, and not being in arrears.
• Within a group:
• One member is nominated as the representative.
• All members are jointly responsible for GST payable.

Divisional Registration

A business with multiple divisions may apply for each division to be registered separately if:

• Filing a single return is difficult.
• Each division maintains independent accounts and same tax period
• Divisions operate in different locations or conduct different activities.

Conditions:

• The business is not part of a GST group registration
• The business doesn’t have outstanding tax with DRC.

Note: Divisions remain registered if the combined turnover of all divisions exceeds the registration threshold.

Application Process

• Compulsory registration: Apply within 30 days of crossing the Nu. 5 million threshold.If not, the Department of Revenue & Customs (DRC) may register the business directly.
• Voluntary registration: Applications can be made at any time for turnover between Nu. 2.5 million and Nu. 5 million.
• Applications are made through the Bhutan Integrated Taxation System (BITS) portal.

Department’s Decision

• DRC will notify applicants of its decision within:
  15 days (normal applications), or
  30 days (divisional registration).
• The notice will state:
  Effective date of registration if approved, or
  Reasons for rejection and the applicant’s right to object.

Cancellation of GST Registration
Businesses may need to cancel their GST registration under certain circumstances. The Department of Revenue & Customs (DRC) oversees the cancellation process.

When to Apply for Cancellation

A registered business must apply for cancellation:

• Within 30 days of permanently ceasing to make taxable supplies.
• If the business is no longer required to be registered but continues to make supplies voluntarily.

Department-Initiated Cancellation

The DRC may cancel registration without an application if it is satisfied that:

• The business is not carrying on any economic activity.
• The business has not maintained proper records, failed to file GST returns, or has not complied with other tax obligations.
• Registration was obtained by providing false or misleading information.

How Cancellation Works

•  If the business has been registered for at least 24 months, the Department must cancel the registration.
• If registered for less than 24 months, the Department may cancel the registration if appropriate.
• The cancellation takes effect from the date specified in the notice issued by the Department.

Obligations After Cancellation

Once registration is cancelled, the business must:

• Immediately cease to be a registered person.
• Stop issuing or using any GST invoices or documents that indicate GST
  registration.
• File a final GST return and pay all amounts due within 30 days from the end of the last tax period.
• Apply for any GST refund, if applicable, within 30 days from the end of the last tax period.

Re-Registration
A previously cancelled business may re-register using the same taxpayer number if it now meets the conditions for GST registration.