How duty and GST on imports are not the same
Duty is determined by classification and origin rules and is calculated based on the value for duty. On the other hand, GST is calculated using the value for tax, which may include duty.
On the Commercial Accounting Declaration (CAD), duty and GST are shown as separate amounts, even though they are assessed at the same point during the import process.
Many importers treat them as the same thing. But they’re not.
Yes, both are collected at the border by the Canada Border Services Agency (CBSA), and both increase the amount you pay on your imports.
But they serve different purposes, are calculated differently, and affect your business in very different ways.
In this article, we explain the differences between duty and GST on imports and identify where Canadian importers usually get confused.
A duty is a tariff charged on certain imported goods under Canada's Customs Tariff. It is assessed and collected by the CBSA when your goods are released into Canada
Duty does not apply to every import. Whether it applies and how much you pay depend on three things:
Every product you import must be classified and assigned an HS tariff classification number (HS code). That code determines the applicable duty rate and whether special measures may apply.
Duty rates can change based on the origin of the goods. Origin also determines whether you can claim preferential duty rates under a free trade agreement.
In most cases, duty is calculated as a percentage of the value for duty. This is generally based on the price you paid for the goods, with adjustments required under Canada’s valuation rules.
Once duty is assessed, it becomes part of your landed cost.
Landed cost is the total cost of bringing your goods into Canada and making them ready for sale, including the purchase price, shipping, insurance, and customs charges.
The Goods and Services Tax (GST) is a federal tax that applies to most goods imported into Canada.
Unlike duty, which is tied to tariff classification and trade policy, GST is a consumption tax.
When goods are imported, GST is calculated on the value for tax, not just the invoice price. This generally includes:
Because duty and GST are both assessed at the time of import, and appear on the same accounting documents, it’s easy to get confused between them.
Here are the most common mistakes Canadian importers may fall into and how to avoid them:
Many importers group duty and GST into a single landed cost line.
To avoid this, track them separately.
Always remember that duty is a customs cost tied to classification and origin, while GST is a consumption tax paid at the time of import.
If your goods qualify for a free trade agreement, the duty may be zero. But GST can still apply.
Duty relief removes duty, not GST. So, don’t assume that duty-free means tax-free.
Some importers estimate GST using only the invoice value, then get surprised at the border. GST is calculated on a broader import value that includes duties and certain freight and insurance costs.
To stay accurate, base your GST estimate on the value for tax, not the invoice price.
At Cole International, we offer trade consulting and customs brokerage services to help Canadian businesses validate tariff classification, origin, and value so that duty and GST are assessed correctly.
Reach out to one of our trade professionals to confirm whether you are paying the right duties and GST, and to identify where you may be leaving money on the table.