Even as Gelephu Mindfulness City operates outside the broader Goods and Services Tax regime; certain services and goods will still attract GST. Telecommunications services for residents within the Special Administrative Region and passenger vehicles will be liable to pay GST. The finance ministry said it will soon sign a Memorandum of Understanding with GMC to clarify GST application.
Businesses operating within GMC will not be required to register for GST for now, as the city will continue following the Bhutan Sales Tax system amid other evolving regulatory frameworks.
At the ground level, the GMC Governor has been holding a series of meetings with business community members, regional heads, and residents to explain how GST and the existing sales tax system work. The GMC administration says its key focus is to keep policies simple and attractive for investors, especially during the city’s early growth phase.
Dr Lotay Tshering, GMC Governor said, “We are not comparing BST with GST. In many places, GST is a better tax system and most major economies are using it. But for GMC, we are exploring whether we can have a more efficient system. Changing the tax system overnight for companies that are already registered or in the process of registering would not be a sensible decision at this stage.”
Despite GST not being applied within GMC, some services will still be taxed. GST will be levied on telecommunications services used by GMC residents, as the city does not yet have its own telecom services.
Pema Wangdi, Collector of Revenue Intelligence Division, DRC said, “GMC does not have its own telecommunications company or a separate set of SIM cards, so it cannot be differentiated. Therefore, GST will be applied, while the rest will remain under the sales tax regime.”
The Department of Revenue and Customs said it will soon notify other government registered service providers in GMC such as banks, insurance companies, and Bhutan Power Corporation to not levy GST.
The department also clarified that talks are underway to ensure that residents in the same country are not affected by two different tax jurisdictions.
Pema Wangdi added that “If goods are brought from Gelephu to the rest of the country, the question arises as to whether this should be treated as an import. If it is considered an import, then GST, customs duty and excise duty would apply. This would result in tax differences for the same commodity imported through Phuentshogling and Gelephu. Such issues will be resolved.”
The finance ministry during the press conference in Thimphu said all outstanding issues are expected to be resolved soon with the signing of the MoU, which will harmonize the tax systems between GMC and the rest of the country.
Meanwhile, to support businesses and residents, a Taxpayer Service Center has been established at the Regional Revenue and Customs Office in Gelephu. The center will provide guidance on tax-related matters and is being supported by international tax experts.
To manage the movement of goods, authorities have also strengthened customs arrangements. In addition to the customs office at the Bhutan–India border, two more customs offices have been set up, one at Shaychamthang along the Gelephu–Tsirang highway, and another at Serzhong along the Gelephu–Zhemgang higTour.