At the Meet the Press Session on Friday, the Department of Revenue and Customs said the Goods and Services Tax compulsory registration for businesses with annual turnover of Nu 5 M will shield micro and small service providers from compliance demands in the early stages of GST implementation. The department clarified that the system will allow these small businesses which are not levied the five per cent GST to grow and gradually integrate into GST framework, stabilize the market, and reduce compliance costs as entrepreneurs become familiar with the system.
Before the implementation of GST regime, most of the services were not levied the sales tax, except for a few such as cable services and tourist standard hotels.
However, under the new GST regime, all services are subject to the five percent tax except those not meeting the annual turnover threshold of Nu 5 M. These businesses include micro and small service providers such as legal firms, accountancy service providers, and drawing and architectural firms, among others.
According to the DRC, this protects them from compliance burden while allowing them to continue operating informally until they are ready to scale.
However, many GST registered service providers fear losing clients to these smaller companies who do not have to charge the five per cent GST.
During the Meet the Press session on Friday, the finance ministry was questioned on measures to mitigate such circumstances.
Sonam Jamtsho, Director General of Department of Revenue and Customs said, “Price alone does not attract customers. For service providers, what matters more is also the quality of service and the credibility of the provider. Therefore, the fear that clients will shift to smaller companies solely because of price is unfounded. If consumers continue to opt for services from non-GST registrants because of lower prices, these businesses will eventually grow. Once their turnover reaches five million ngultrum, they will automatically be required to register for GST.”
He added that availability of simplified GST guides, sector-specific training, and dedicated help-desk support will help in further reducing compliance costs for businesses.
The department also said it will monitor challenges in employment-intensive sectors and may provide administrative easing, phased enforcement, or targeted support without affecting the overall GST framework.
Meanwhile, the government said that while the initial adjustment may seem challenging, GST benefits service providers by ensuring tax neutrality, eliminating cascading taxes, and increasing market transparency.
Kinzang Lhadon
