Key Differences Taxes and tariffs are both forms of revenue for governments but serve different functions. A tax is a compulsory charge levied by a government on income, property, goods, or services to finance government activities. A tariff, on the other hand, is specifically a tax on imports or exports between sovereign states.

In general, customs duties are based on product characteristics, tariffs are fees applied to specific products from specific countries for specific times, and tax rates (VAT/GST) are fixed and calculated on the total value of the product imported into the country. Every country has different fee obligations, with different rates, rules, and forms.

While duty is the tax that the government imposes on the goods and services manufactured and sold within a country and on the goods and services imported from another country, the tariff is the tax that the government imposes only on the goods or services imported between different countries to protect the business of domestic manufacturers and suppliers by reducing the level of competition.