With GST, trade between India and Bhutan has slowed down. For one, GST has rendered the items Bhutan exports to India costlier and those that the country imports from India cheaper. Bhutan is worried that this may result in a spike in imports, depleting the country’s rupee reserves.

In case of exports and imports, GST is levied at the entry points and not at the point of sales. Bhutan wants India to allow it to levy the tax at the point of sales. In fact, the country has stopped imports of vehicles from India for want of legal clarity on how GST can be imposed.

Bhutan may lose up to Rs 140 crores a year as the GST regime puts an end to excise duty refunds. The loss may widen to Rs 290 crores once petroleum comes under the GST ambit. Also the huge amount of paper work is rendering the movement of consignments painful.

Bhutan’s economy has strong links with India since India is the key transit route for its goods and an important trading partner. As much as 90 per cent of Bhutan’s imports come from India and these include cooking gas, fuel and kerosene which are at a subsidised rate.