SALES TAX DIVISION

Frequently Asked Questions (FAQs)

1. What kind of indirect tax incentives are eligible for manufacturing industries?

 

• Sales Tax on purchase of Plant and Machinery and accessories thereof by a manufacturing industry shall be exempted from Sales Tax subject to conditions laid down in Customs rules (Part II, rule 1.10 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000)

 

• Sales Tax on Raw Materials for use solely as raw materials by a manufacturing industry shall be exempted at the point of entry subject to conditions laid down in Customs rules except 1.10(h) (Part II, rule 1.11 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000).

 

• Customs Duty on import of Plant and Machinery and spares parts thereof by a manufacturing industry shall be exempted from Customs Duty  subject to conditions laid down in Customs rules Part II, rule 1.9 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000

 

• Customs Duty on import of Raw Materials and Assembly Components of Plant and Machinery  by a manufacturing industry shall be exempted from Customs Duty  subject to conditions laid down in Customs rules Part II, rule 1.9 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000

 

 

 

2. What kind of indirect tax incentives are eligible for service industries?

 

• Sales Tax on purchase of Plant and Machinery and accessories thereof by a service industries shall be exempted from Sales Tax subject to conditions laid down in Customs rules (Part II, rule 1.10 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000)

 

• Customs Duty on import of Plant and Machinery and spares parts thereof by a service industry shall be exempted from Customs Duty subject to conditions laid down in Customs rules Part II, rule 1.9 of the Rules on the Sales Tax Customs and Excise Act of the Kingdom of Bhutan, 2000.

 

 

 

3. How does one apply for exemption for Plant & Machinery and Raw Material?

 

•          For Plant & Machinery

 

Step 1.

 

Submit duly completed ST FORM II and letter of undertaking duly stamped and signed by the authorized person.

(Both forms are available for downloads from MOF website)

 

Step 2.

 

Submit forms to DRC Head Office along with relevant invoices.

 

Step 3.

 

Collect Sales Tax Exemption Certificate (STEC) from the Sales Tax Division, DRC Head Office and present it at the concerned check-post at the time of import.

 

• For Raw Materials

 

Only those industries falling under the manufacturing sector shall be exempted from payment of Sales Tax.

 

Step 1.

All manufacturing industries shall submit a list of raw materials to be exempted to DRC Head Office for approval on an annual basis through the RRCO concerned.

Step 2.

Annual requirement for raw materials after having been duly approved by the Department shall be submitted to the concerned RRCO and accordingly the exemption shall be granted as and when the imports are made, by the concerned RRCO.

 

 

 

4. How is refund processed?

 

Sales Tax on goods imported by a third party such as a contractor or an agent on behalf of an exempt organisation shall be paid at the point of entry. The Sales Tax paid thereof at the time of entry shall be refunded to the exempt organisation upon fulfillment of the following procedures:

•          Refund claims shall be made only by the exempt organisation and not by the contractor or agent working on behalf of the exempt organisation.

•          Claims must be routed through the concerned RRCO where the Sales Tax was originally paid

•          Application for Sales Tax refund must be submitted to the concerned RRCO as per GP Form-I (form are available for download from MOF website).

•          Claims must be made within 12 months from the date of payment of Sales Tax. Claims after the expiry of 12 months from the payment of Sales Tax shall not be entertained.

•          All claims must be accompanied by a copy of an Import Declaration Form (ST Form-I), relevant bills, invoices or cash memos and original revenue receipts proving that Sales Tax has been paid at the point of entry.

•          The concerned RRCO shall verify the claims and confirm whether Sales Tax amount has been deposited with the RGR account or not before forwarding the claims to the DRCHO for payment.

•          The DRCHO shall make refund payment (through a/c payee cheques) directly into the account of the exempt organisation.

 

 

 

5. Who is a Sales Tax Collecting Agent (STCA)?

STCA is entity appointed and made liable by the DRC to collect and deposit sales tax levied on goods and services.

 

 

 

6. What are the responsibilities of a Sales Tax Collecting Agent (STCA)?

 

The following are the responsibilities:

 

•          Application for registration is to be made in GP Form III with the concerned RRCO. (form  available for downloads from the MOF website)

•          RRCO shall then issue to the STCA a Sales Tax Registration Number, in lieu of registration certificate which has to be quoted in all their correspondences with the Department.

•          On receipt of the Registration Number all licensed manufacturers, services providers, dealers/distributors of commodities identified and registered with by the Department shall be responsible and authorized for the collection of Sales tax at the time of sale on behalf of the Government.

•          All registered agents shall submit name list of manager or other staff with specimen signatures responsible for collection and deposit of sales tax to the concerned RRCO.

•          All registered agents are required to file tax returns on periodic basis using the relevant ST Forms to the concerned RRCO.

•          All registered agents should furnish information related to change of address and location of the business, change of ownership, closure of business, etc.

 

 

 

7. What is Sales Tax at Point of Entry and Sales Tax at Point of Sale?

 

Sales Tax at Point of Entry

 

Most goods and commodities imported are subject to levy of sales tax at the customs check point (Point of entry for goods and commodities) as per rates prescribed under the Bhutan Trade Classification Customs Tariff and Sales Tax Schedule. All sales tax levied on such goods and commodities at the time of entry is known as Sales Tax at Point of Entry.

 

Valuation shall be done on Free on Board (FOB) basis. The FOB value shall exclude discounts if the goods are procured directly from manufacturers or authorized dealers provided proof of excise duty paid in India are submitted. The FOB value shall however include trade/quantity/cash discount if goods are procured from the open market.

 

Sales Tax at Point of Sale

 

Sales Tax on domestically manufactured goods and commodities, services, and the sale of selected imported goods by an appointed Sales Tax Collecting Agent by the DRC is known as Sales Tax at Point of Sale.

 

Valuation for the purpose of levying Sales Tax at the point of sales shall be based on the price of the goods and services sold at the time of sales but without considering the discount or as fixed by DRC.

 

 

 

 

8. How do I qualify for Sales Tax Exemption?

 

If you qualify under any one of the following categories listed below then you become eligible for Sales Tax Exemption:

 

•          Foreign Diplomatic Missions, International Organisations and their Privileged Personnel

 

Foreign Diplomatic Missions, International Organizations and their privileged personnel shall be exempted from payment of Sales Tax provided the exemptions thereof are in accordance with the obligations under International Conventions or Covenants, Multilateral or Bilateral agreements signed with the Kingdom of Bhutan.

 

•          Bhutanese Organisations and Individuals

 

Bhutanese organisations and individuals shall be exempted from payment of Sales Tax provided the exemptions thereof are in accordance with the privileges/relief granted by any other Acts of the Kingdom of Bhutan, National Assembly resolutions or by a Royal Charter.

 

•          Manufacturing Industry

All licensed manufacturing Industries are eligible for exemption on Plant& Machinery and spare parts thereof including their Raw Material. For the purpose of this exemption, plant & machinery and spare parts thereof is defined as those　plant & machinery, which are peculiar to and directly related to the manufacture of its products.

 

•          Service Industry

 

All licensed service provider are eligible for exemption on Plant& Machinery and spare parts thereof which are used for providing the service. For the purpose of this exemption, plant & machinery and spare parts thereof is defined as those　plant & machinery, which are peculiar to and directly related to the services rendered.

 

•          Exemptions in Public Interest

 

The Ministry of Finance taking into consideration RGOB policies and other socio-economic factors deemed relevant may delegate and authorize the Department of Revenue & Customs to accord exemptions under these rules.

 

 

 

9. Why third parties involved in contract work and supplies for Exempted Organization not exempted from Sales Tax Payment at source and instead need to process for refund?

 

This is done to ensure that exemption facilities are not misused and deflected.

 

 

 

10. Where can we find the appropriate commodity description and code required while we apply for sales tax exemption for import?

 

You can find the appropriate commodity description and code in the Bhutan Trade Classification Customs Tariff and Sales Tax Schedule. You will find this book for sale at The Kuensel Corporation or the Kuensel Shop at Chaglam Plaza, Thimphu. However ensure that additional corrigendum issued and notified is attached with the book.

 

 

 

11. When is the last date for depositing sales tax and the submission of the monthly sales tax returns?

 

The dates for depositing sales tax are as follows unless an authorization has been obtained from DRC:

 

STCA for sales tax on cement:

10^th of the following month.

 

STCA for sales tax on beer:

10^th of the following month

 

STCA for sales tax on aerated water:

10^th of the following month

 

STCA for sales tax on hotels & restaurant services:

10^th of the second following month as approved vide note sheet DRC/STD (Rules)2009/4963 dt. June 15, 2009

 

STCA for sales tax on cable services:

10^th of the second following month

 

STCA for sales tax on cinema operation:

At the time of endorsing bills/ tickets subject to adjustment at the end of the month.