NA adopts Excise Tax Bill, rejects most NC recommendations

Dorji Choden

The National Assembly (NA) yesterday adopted the Excise Tax Bill of Bhutan 2025, approving only one of the three recommendations made by the National Council (NC).

The key point of discussion revolved around the commencement date of the Bill and taxation on specific items.

The NA accepted the NC’s recommendation to impose a zero percent tax on firefighting vehicles, overturning its earlier proposal of a five percent tax.

However, the NA stood firm on its original stance, rejecting the NC’s recommendation to impose a 100 percent tax on electronic cigarettes and vaping devices, instead retaining the previously approved 20 percent tax.

The NC recommended that the tax be effective from the day the Bill was introduced in the NA, citing Section 46B of the Public Finance (Amendment) Act 2012.

This section mandates that “the imposition or increase of any tax or abolition, reduction or remission of any existing tax once passed as law by Parliament, shall be applied retroactively from the date it was initially tabled in the NA.”

The chairperson of the Economic and Finance Committee and Member of Parliament (MP) for Bartsham-Shongphu, Rinchen Wangdi, indicated the committee would defer to the majority vote of the house, stating, “There are both pros and cons with the implementation date of January next year.”

MP for Radhi-Sakteng, Tashi Tenzin, elaborated on the complexities of immediate implementation.

“If we implement the Bill immediately, then the current Bhutan sales tax (BST) needs to be abolished, which we cannot do. However, we can only implement it after the goods and services tax (GST) is implemented in January 2026,” he said.

Concerns about double taxation were also raised, with Tashi Tenzin, stating that BST and green tax are already included in the excise tax. Therefore, the prices of goods will soar high by paying sales tax along with excise tax.

Conversely, he warned that an immediate implementation date could lead to issues like hoarding and contravening the Public Finance Act.

“People may stock up goods when the tax is low and sell them when the new tax is implemented. And the other issue is going against the Act,” Tashi Tenzin said.

Representing the finance minister, Agriculture Minister Younten Phuntsho urged the house to maintain the commencement date as January 1 next year.

He highlighted practical challenges, stating, “The finance ministry has come up with an anti-hoarding strategy. It will be an issue with public service as the system is manually done if we implement it immediately.”

Several MPs, however, expressed concerns about the proposed January commencement date.

Opposition Leader, Pema Chewang, argued, “For GST, it is mandatory to have a system, whereas for excise tax, it is not mandatory as they have been doing it manually. The only issue is related to an operation which is going against the Act.”

He also criticised the finance minister’s absence during the Bill’s adoption, questioning the priority of being abroad over attending such an important legislative session.

MP for Gangzur-Minjey, Loday Tsheten, pointed out an inconsistency. “When it was earlier suggested that the GST and excise tax could be combined, the government maintained they were entirely different in nature. Now, however, when the government argues that the two should be implemented together, it seems inconsistent to me.”

In addition, MP for Thrimshing-Kangpar, Damche Tenzin, raised concerns about lack of urgency.

“The excise tax, unlike the property tax, does not require much time or human resources. If that were the case, as a member of the legislative committee, I could support it. However, given the evidence that excise duty does not require extensive resources, he could not support a delayed commencement date, especially when the decision was put to a vote,” he said.

The House directed that the government to take full responsibility for any issues arising from the delay in implementation.

The January implementation date was approved by a majority vote of 28 “yes,” 2 “abstain,” and 13 “no” votes.