With the rollout of Goods and Services Tax or GST, people are still unclear about how the tax is levied on banking and financial services. According to the Financial Institutions Association of Bhutan, not all banking and financial services are taxed. All core services will be GST-free.
According to the association, banking services that are exempt from GST include granting and managing loans and credit, handling deposit and current accounts, processing payments and transfers, issuing cheques and negotiable instruments, dealing in shares and bonds, managing pension and provident funds, and life insurance and reinsurance services.
The association said these everyday financial activities do not attract GST.
However, loan processing fees, commission or fees for service provided, and other charges are not considered interest but are fees charged for services such as appraisal, documentation, and administration.
Since these charges represent a supply of service distinct from lending money, they are subject to GST.
Other non-core services such as ATM and credit card usage fees, and account maintenance fees will be also subject to a 5 per cent GST.
According to the Bank of Bhutan, it does not levy any charges on its own ATM transactions. All transactions carried out at BoB ATMs are free of cost, and therefore no GST is applied on such transactions.
However, if a BoB ATM cardholder uses the ATM of another bank, certain charges will apply. These charges are imposed by the respective banks whose ATM is being used. In that case customers have to pay GST after five free transactions.
When it comes to remittance services, the revenue and customs department in a news conference yesterday said that GST is not charged on the full amount of the money being sent but on the service fee.
Sherab Chogyel, GST Commissioner, Department of Revenue and Customs said, “The 5 per cent GST is not taxable on the remittance amount. As it is a goods and services tax, only the services that are charged at certain fees will attract GST. Suppose 10,000 dollars is transferred in remittance and 50 dollars is charged as fee, so only the fee attracts GST. It is not applicable on the remittance amount.”
According to RMA’s annual report, in the 2024-2025 financial year, inward remittances surged by 69 per cent to over 240 million dollars from the previous year, driven by higher transfers through formal banking channels, improved digital platforms and Remit Bhutan.
Remittances remain a vital source of foreign exchange and household income in Bhutan, supporting both reserve accumulation and domestic consumption.