GST vs Customs Duty: Key Differences Every Import Export Business Must Know
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- by MI September 16, 2025
Introduction:
In the world of import-export business, understanding GST (Goods and Services Tax) and Customs Duty is crucial. Both are indirect taxes levied by the government, but they differ in application, scope, and purpose. Many businesses get confused about when GST is applied and when Customs Duty is applicable. This blog explains the clear differences between GST and Customs Duty to help businesses stay compliant and manage costs effectively.
What is GST?
- GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services within India.
- It replaced multiple indirect taxes such as excise duty, service tax, and VAT.
- GST is a destination-based tax, meaning it is collected at the point of consumption.
Types of GST in India:
- CGST (Central GST): Collected by the Central Government.
- SGST (State GST): Collected by the State Government.
- IGST (Integrated GST): Applied on inter-state supply of goods/services and imports.
What is Customs Duty?
- Customs Duty is a tax levied on goods imported into India (and sometimes on exports).
- It is charged by Indian Customs under the Customs Act, 1962.
- Customs duty helps protect domestic industries, regulate trade, and generate revenue.
Types of Customs Duties:
- Basic Customs Duty (BCD)
- Countervailing Duty (CVD)
- Anti-dumping Duty
- Safeguard Duty
Key Differences: GST vs Customs Duty
| Aspect | GST | Customs Duty |
|---|---|---|
| Definition | Tax on domestic supply of goods and services. | Tax on import/export of goods across borders. |
| Law Applicable | Goods and Services Tax Act, 2017 | Customs Act, 1962 |
| Levy Point | On supply of goods/services within India. | On goods imported into India or exported out of India. |
| Applicability | Domestic transactions and imports. | Imports (and sometimes exports). |
| Types | CGST, SGST, IGST | BCD, CVD, Anti-dumping, Safeguard duty |
| Purpose | To create a unified tax system within India. | To regulate trade and protect domestic industry. |
| Impact on Business | Paid on sales, purchases, and imports. | Paid on goods at the time of customs clearance. |
How They Work Together in Imports
When you import goods into India, Customs Duty (like BCD) is first applied. After that, IGST is levied on the value of goods + customs duty. So, both Customs Duty and GST can be applicable on imported goods.
Conclusion
Both GST and Customs Duty are important for businesses engaged in trade. While Customs Duty applies specifically to imports (and some exports), GST applies to domestic transactions and imports. Understanding the difference helps businesses plan costs, stay compliant, and take advantage of tax credits where applicable.
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