Excise Tax Act of Bhutan 2025

The Excise Tax Act of Bhutan 2025 is one of the three tax bills tabled by the Ministry of Finance on 26 May 2025 — with the Income Tax Bill and the GST (Amendment) Bill — and took effect on 1 January 2026, the same day as the Goods and Services Tax. It created a standalone excise regime for the goods Bhutan taxes on top of GST: vehicles, alcohol, tobacco and sugar-sweetened beverages.^[1]

Its practical effect was a swap: cars became cheaper and vices became dearer. Under the previous stack a vehicle attracted sales tax, green tax and, for third-country imports, customs duty; from January 2026 vehicles instead pay excise plus the flat 5 per cent GST, a combination lower than the old burden across all categories.^[2]

Vehicle taxation

The Act cut effective taxes on small and medium vehicles by roughly nine to ten percentage points and changed the taxable base for imports from India from CIF (cost, insurance and freight) to FOB (free on board) value, further lowering the amount the rate applies to. Electric vehicles remain tax-exempt, and vehicles from India continue to attract no customs duty under the free-trade arrangement.^[3]

The transition was turbulent for the trade. Once the coming reductions became public in mid-2025, buyers stopped buying: the largest dealer, Zimdra, reported around 30 cancellations and a booking rate that fell from seven to ten a day to zero, and dealers — already battered by the pandemic and the 2022–2024 import moratorium — pressed for transitional relief, including refunds of green tax already paid on stock that would become unsellable at old prices.^[4] When the new prices arrived in January 2026, they were lower across all categories, but by less than many buyers had expected — final prices depend on factory cost and dealer margins as much as tax — producing a muted public reception.^[2]

Alcohol, tobacco and sugary drinks

In the opposite direction, the Act raised excise on alcohol, tobacco products and sugar-sweetened beverages, on stated public-health grounds.^[5] The effect showed up quickly in the price statistics: in the months after commencement, the alcoholic beverages and betel-nut category of the consumer price index was rising at over 23 per cent year on year — the fastest of any category — against overall inflation of 6 to 8 per cent.^[6] Domestically produced liquor from the Army Welfare Project had contributed Nu 802 million (~USD 9 million) in excise in FY 2024-25, and beer was the single largest sales-tax item in the country, so the fiscal stakes of alcohol taxation are considerable.^[7]

See also

• Vehicle import moratorium (2022–2024)
• Goods and Services Tax (Bhutan)
• Income Tax Act of Bhutan 2025
• Electric vehicles in Bhutan

References

1. Excise Tax Bill to make cars cheaper but alcohol, tobacco and coke more expensive — The Bhutanese
2. Vehicle prices come down with GST and Excise Tax — The Bhutanese, January 2026
3. Bhutan's vehicle tax cut to make small and medium cars cheaper by 10% — Kuensel via Asia News Network
4. Effective date of Excise and GST Bills threaten to sink vehicle dealers in Bhutan — The Bhutanese
5. Bhutan is set to raise alcohol and tobacco excise taxes — Movendi International, 20 June 2025
6. Inflation hits 7.72% as food and transport costs climb — BBS, 9 July 2026
7. National Revenue Report FY 2024-25 — Department of Revenue and Customs