GST cut fails to lower doma prices

2026-03-18 - 11:53

When the government reduced sales tax on betel nut and betel leaves to a uniform 5 per cent Goods and Services Tax, many expected prices to fall. Instead, prices in Thimphu have increased. The Competition and Consumer Affairs Authority says the rise is not due to local overpricing, but higher import costs from India, where Bhutan sources most of its betel nuts and leaves. Retailers say costs have increased sharply. A retailer in Thimphu used to buy 80 pieces or a pon of peeled betel nut for between Nu 150 and 200 last year under the previous tax regime, which attracted a 30 per cent sales tax on betel nuts and 10 per cent on betel leaves. Today, the same quantity costs between Nu 500 and 800. Betel leaves have also become more expensive. A bundle of 100 leaves now costs between Nu 320 and Nu 500, up from less than Nu 280 previously. To cope, retailers have adjusted their sales. Some now reduce the number of pieces in a packet while keeping the price unchanged. For example, a packet sold for 50 ngultrum may now contain one piece less. A market price analysis by the Competition and Consumer Affairs Authority found similar trends. Packets of mittha patta that once contained seven pieces now have six, while bangla patta packets have dropped from eight pieces to seven. “When we reduce the number of pieces in a doma packet, customers complain and ask whether it is due to GST. So instead, I keep the number of pieces the same but make the sizes slightly smaller,” said Santi Pradhan, a retailer. Wholesaler Nim Gyem said, “When we sell the new stocks for 400 and the old stocks for Nu 500, customers are often shocked and question us about the prices. But we can’t help it, as the prices have already increased at the source.” Consumers are feeling the impact. “The prices have increased now. For the packaged ones, the price remains the same while the number of pieces has decreased. And 80 pieces of betel nut, which used to cost around Nu 150, now costs between 360 and 450 ngultrum,” said Langa Dorji, a consumer. The Competition and Consumer Affairs Authority states that the price increase originates in India, as Bhutan relies heavily on imports. The country imported nearly 325 thousand kilogrammes of betel nut and 1 million kilogrammes of betel leaves last year. “India’s 100 per cent import duty on areca nuts is one factor driving up prices, which is meant to protect Indian farmers from imports from Sri Lanka and Bangladesh. Another factor is the outbreak of Yellow Leaf Disease, which has reduced overall production,” said Tshewang Penjor, the Deputy Chief Trade Officer, CCAA. Officials also note that exporters may have raised prices in anticipation of Bhutan’s GST reduction. For now, the authority has found no evidence of price manipulation among Bhutanese traders. It says sustained consumer relief will depend on better monitoring of import prices, diversifying supply sources, and improving public awareness. The officer said, “It is important for the government to monitor areca nut prices, both wholesale and retail, at the source. Additionally, with GST newly implemented in the country, the DRC should strengthen the taxation system while ensuring adequate public awareness.” The authority also urges the public to report any unfair pricing practices, which will be addressed under the Consumer Protection Act of Bhutan. Kinzang Lhadon Edited by Sangay Chezom