Summary
- The Customs Act 2025 (Law No. 2 of 2025) commenced on 26 December 2024 and replaced the Customs Act 1960 that had applied under Schedule A of the Application of Laws Act 2024. All "$" figures in the Act are United States dollars (s. 3A).
- Customs duty is charged on goods imported into the "customs territory", which is GMC excluding any free trade zone; excise duty is charged on goods manufactured in GMC. Duty rates are prescribed by the designated officer by Gazette order.
- Import and export by air is permitted only at customs airports, by rail only at customs stations, and by road subject to conditions approved by the Director-General of Customs. Dutiable goods arriving by air or road are first deposited in a free trade zone unless exempted.
- Every declaration must give "a full and true account" (s. 96). Refund claims and short-levy demands are limited to 5 years, with no limit for fraud.
- Offences include false declarations (s. 128), fraudulent evasion (s. 128D), importing or exporting uncustomed or prohibited goods (ss. 128F, 128G), possession (s. 128I), computer manipulation (s. 131) and bribery (s. 138). The Director-General may compound offences (s. 126).
- The Kingdom of Bhutan's sales tax, customs and excise laws also apply in GMC through Schedule C of the Application of Laws Act 2024 (s. 5A).
Why customs law matters for GMC's priority industries
The Gelephu Mindfulness City (GMC) is a Special Administrative Region in southern Bhutan. Three of its eight priority industries, Agri-Tech and Forestry, Green Energy and Technologies, and Aviation and Logistics, depend on the movement of physical goods across the region's boundary. The Royal Charter No. 1 of 2024 anticipates this: Article 5 gives the GMC Authority (GMCA) powers that include fiscal, customs and tariff benefits, licences and the conclusion of free trade agreements. The Customs Act 2025 is the statute through which those powers are exercised on the ground.
This article is based on the official summary of the Customs Act 2025 published by GMC, the Royal Charter and the Application of Laws Act 2024. Where the Act delegates a matter to Gazette orders or to the Director-General of Customs, this article says so.
The Act, the administrator and the currency
The Customs Act 2025 is deemed to have commenced on 26 December 2024, the same date as the Companies Act, Income Tax Act, Employment Act, Foreign Workforce Act and Financial Services Act. It repeals the Customs Act 1960 that had been applied in GMC as an item of Schedule A to the Application of Laws Act 2024, replacing an applied statute with a home-grown one. The Act is administered by a Director-General of Customs ("the DG"), and the "designated officer", the officer designated by the Druk Gyalpo for the Act, holds the rate-setting and exemption powers. Section 3A provides that references to "$" in the Act are read as United States dollars.
Customs territory and free trade zones
The Act's central concept is the "customs territory", defined as GMC excluding any free trade zone. Customs duty is charged on goods imported into the customs territory. Goods that remain inside a free trade zone are, for duty purposes, not treated as imported. This structure allows goods to be landed, stored, sorted, processed and re-exported without duty, and allows duty to be paid only when goods leave the zone for the customs territory.
The Act reinforces this by requiring that dutiable goods imported by air or by road be first deposited in a free trade zone, unless the DG exempts them. Businesses in logistics, transhipment and light manufacturing should therefore expect the free trade zone to be the normal entry point for dutiable cargo, and should structure their operations around zone premises. Free trade zones are designated under the Act, a matter for the GMCA.
Duty, excise and exemptions
Two duties are created by this section. Customs duty applies to goods imported into the customs territory. Excise duty applies to goods manufactured in GMC. The rates for both are prescribed by the designated officer by order in the Gazette, so an importer prices a shipment from the current Gazette orders.
The designated officer may exempt classes of goods or classes of persons from duty by Gazette order, or may exempt by individual direction. This is the mechanism through which the Royal Charter's "customs and tariff benefits" (Art. 5) can be delivered to a specific investor or industry. Article 5 also allows the GMCA to conclude free trade agreements.
Manufacturers of dutiable goods within GMC need a manufacturing licence, and bottlers a bottling licence, under the Act. Duty-free shops for tourists and "composite" licences covering more than one activity are also provided for.
Modes of entry and exit
The Act restricts the physical channels through which goods may lawfully move:
| Mode | Rule |
|---|---|
| Air | Import and export only at customs airports |
| Rail | Import and export only at customs stations |
| Road | Subject to times and conditions approved by the DG for dutiable goods |
Customs airports, customs stations and road crossings are designated under the Act, and GMC's Aviation and Logistics pillar is one of the eight priority industries that this framework serves.
Manifests, declarations and electronic filing
Carriers must lodge an inward manifest within 24 hours of arrival and an outward manifest within 48 hours of departure. Importers and exporters must make declarations, and s. 96 requires every declaration to give "a full and true account" of the goods. Supporting documents must be produced on demand. The Act provides for an electronic computer service, with authentication codes, through which declarations and related filings are made. Reliance on that service brings a specific offence into play: manipulation of the computer service is an offence under s. 131.
The DG may issue customs rulings in accordance with the Schedule to the Act, giving an importer certainty on the treatment of particular goods before they are shipped. A business seeking a ruling confirms the current requirements with the DG.
Warehousing
The Act provides for two kinds of warehouse: government warehouses and licensed private warehouses. Goods deposited in a warehouse are covered by a warehouse deposit receipt. Warehousing allows an importer to defer duty until goods are removed for home use, and to store goods intended for re-export without paying duty at all. A licensed warehouse is the natural complement to a free trade zone for a distributor serving both the GMC market and markets beyond it.
Drawback
Drawback is the refund of duty on goods that are exported after duty has been paid. The Act allows drawback in two situations:
- Re-export of unused goods within 6 months of import, subject to a minimum claim of $100.
- Goods used in manufacture where the manufactured product is exported within 12 months.
The second limb is important for GMC's manufacturing and agri-tech pillars: an exporter can recover duty on imported inputs embodied in exported products. Claims must be documented against the original import entries; the Act's record-keeping and declaration rules make this a practical compliance point from the day of import.
Refunds, short levies and valuation disputes
Refund claims must be made within 5 years. Demands for duty short-levied may likewise be made within 5 years, with no time limit where the short levy results from fraud. A five-year record retention discipline for customs entries is therefore the minimum.
Where the customs authority values goods differently from the importer, the importer may object within 14 days of the valuation. An appeal to the court must be brought within 28 days. "Court" in the GMC Acts means the judicial body the Druk Gyalpo designates for the provision in question (see our guide to dispute resolution in GMC), so the identity of the appellate body is a matter of designation rather than a named court.
Enforcement: search, seizure and forfeiture
Customs officers have powers of search and seizure. Seized goods may be forfeited. Goods that are unclaimed are forfeited after one month. The Act permits road barriers to be established for customs control. The DG may issue customs ticket notices under s. 125A, a mechanism for dealing with minor contraventions without prosecution, and may compound offences under s. 126.
Offences
The offence provisions are grouped in ss. 128 to 141:
| Offence | Section |
|---|---|
| Making a false declaration | s. 128 |
| Fraudulent evasion of duty | s. 128D |
| Importing uncustomed or prohibited goods | s. 128F |
| Exporting uncustomed or prohibited goods | s. 128G |
| Possession of uncustomed or prohibited goods | s. 128I |
| Manipulation of the customs computer service | s. 131 |
| Bribery of or by customs officers | s. 138 |
Two practical points follow from the structure. First, the "full and true account" standard in s. 96 means that a careless declaration, not only a dishonest one, exposes the declarant under s. 128. Second, the possession offence in s. 128I reaches a purchaser or warehouse-keeper who holds goods on which duty was evaded by someone else; supply-chain due diligence on duty status is therefore part of customs compliance for anyone dealing in dutiable goods.
The Bhutan overlay: Schedule C
The Customs Act 2025 is not the only tax law affecting goods in GMC. Section 5A of the Application of Laws Act 2024, inserted by the 2025 amendment, applies the Kingdom of Bhutan's sales tax laws in GMC. Schedule C lists the Bhutan Sales Tax, Customs and Excise Act 2000 and related rules and tax Acts of 2001, 2011, 2012, 2014, 2017 and 2020, the Bhutan Trade Classification and Tariff Schedule (7th edition, 2022), and instruments of 2023. A repeal or amendment of those laws in Bhutan does not automatically take effect in GMC unless the GMCA accepts it.
Two consequences follow from a breach. First, a business importing goods into GMC must consider Bhutanese sales tax alongside GMC customs duty, and the interaction between the two is governed by the GMCA's acceptance decisions rather than by either statute alone. Second, the Bhutan Trade Classification and Tariff Schedule is the classification framework applied through Schedule C; importers should classify goods against it when preparing declarations and ruling requests. The applicable rates are those in the instruments as applied and as modified by the GMCA.
How this fits GMC's wider investment framework
The Gelephu Mindfulness City Authority describes the Economic Development Group (EDG) as a one-stop shop offering end-to-end assistance including regulatory clearances and coordination with government agencies. For a manufacturer or logistics operator, customs licences (manufacturing, bottling, warehouse), free trade zone access and any exemption direction under the Customs Act are among the clearances to raise with the EDG at the planning stage. Income tax incentives for the same businesses, such as the founders company exemption under s. 13Y and the strategic and development company concessionary rate under s. 43D of the Income Tax Act 2025, both closed to new approvals after 31 December 2030, are dealt with separately (see our guide to GMC tax incentives).
Practical checklist for importers and exporters
- Identify whether your premises will be inside a free trade zone, in the customs territory, or both; plan for dutiable air and road cargo to enter through a zone first.
- Obtain the current Gazette orders on duty and excise rates and on exemptions before pricing.
- Apply for any manufacturing, bottling, warehouse or composite licence you will need before operations begin.
- Register for the electronic computer service and control the authentication codes; s. 131 makes misuse an offence.
- Build declaration procedures around the s. 96 "full and true account" standard, with supporting documents ready on demand.
- Diary the 24-hour inward and 48-hour outward manifest deadlines with your carriers and forwarders.
- Track duty-paid imports against exports to claim drawback within 6 months (unused goods) or 12 months (manufactured exports); note the $100 minimum claim.
- Keep customs records for at least 5 years to match the refund and short-levy windows.
- Object to any disputed valuation within 14 days and appeal within 28 days.
- Map Bhutanese sales tax under Schedule C onto every import, and confirm with the GMCA which Bhutanese amendments have been accepted.
- Consider a customs ruling from the DG for any classification or valuation question with material duty at stake.
- Direct customs queries to the GMC customs administration and tax queries to the GMC tax administration.
Frequently asked questions
What duty will I pay on goods imported into GMC?
Customs duty on imports into the customs territory and excise duty on goods manufactured in GMC are charged at rates the designated officer prescribes by Gazette order, and classes of goods or persons may be exempted by order or individual direction. Bhutanese sales tax may also apply through Schedule C of the Application of Laws Act 2024.
Is there a free trade zone in GMC?
The Act defines the customs territory as GMC excluding any free trade zone, and requires dutiable goods imported by air or road to be deposited first in a free trade zone unless the DG exempts them. Zones are designated under the Act.
Can I recover duty on imported inputs if I export the finished product?
Yes. The Act provides drawback for goods used in manufacture where the product is exported within 12 months, and for unused goods re-exported within 6 months, subject to a minimum claim of $100.
How long can customs come back to me for underpaid duty?
Short-levy demands may be made within 5 years. Where the short levy results from fraud there is no time limit. Refund claims are also subject to a 5-year limit.
What happens if my declaration is wrong?
Section 96 requires a full and true account, and false declarations are an offence under s. 128; fraudulent evasion is a separate offence under s. 128D. Minor matters may be dealt with by customs ticket notice (s. 125A) or composition (s. 126). Correct errors promptly and keep the supporting documents that show good faith.
Does Bhutan's customs law still apply in GMC?
The Customs Act 2025 is GMC's own customs statute, but Schedule C of the Application of Laws Act 2024 applies the Bhutan Sales Tax, Customs and Excise Act 2000 and related instruments in GMC as well. Bhutanese repeals take effect in GMC only if the GMCA accepts them.
Key takeaways
- Duty attaches on entry into the customs territory; free trade zones and licensed warehouses defer or avoid it.
- Rates and exemptions live in Gazette orders and DG directions; the Royal Charter (Art. 5) contemplates tariff benefits as an investment tool.
- Manifests (24/48 hours), declarations (s. 96) and the electronic service are the compliance core; five-year limits govern refunds and short levies.
- Offences in ss. 128–141 reach careless declarations and possession of uncustomed goods, not only smuggling.
- Bhutanese sales tax and the Bhutan tariff classification apply in GMC through Schedule C, subject to GMCA acceptance of changes.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Customs Act 2025 (Law No. 2 of 2025), ss. 3A, 96, 125A, 126, 128, 128D, 128F, 128G, 128I, 131, 138; Schedule (customs rulings)
- Royal Charter No. 1 of 2024, Art. 5
- Application of Laws Act 2024 (Law No. 1 of 2024), ss. 4, 5A; Schedules A and C
- Income Tax Act 2025 (Law No. 6 of 2025), ss. 13Y, 43D
- GCRO FAQ for GMCA Entities (3 June 2026, v0.2), Gelephu Corporate Registration Office
