The Indian government has extended the customs duty exemption on cotton imports by two months, allowing textile and apparel manufacturers to continue importing the raw material without the specified import duties until December 31, 2026. The earlier exemption was scheduled to expire on October 31.
The extension comes as domestic cotton prices remain firm despite the arrival of the new crop season. The government aims to improve raw material availability, ease cost pressures for textile manufacturers and support the competitiveness of India’s textile industry. The decision is particularly relevant for spinning mills, garment manufacturers and micro, small and medium enterprises (MSMEs) that depend on cotton for production.
Key Takeaways
- The government has extended the cotton import duty exemption until December 31, 2026.
- The previous exemption was scheduled to end on October 31, 2026.
- The extension was notified through Notification No. 35/2026-Customs dated October 30.
- The original exemption covered cotton imports classified under Customs Tariff Heading 5201.
- The waiver covers the applicable customs duty and Agriculture Infrastructure and Development Cess (AIDC).
- Textile mills and MSMEs are expected to benefit from improved access to imported cotton.
- Domestic cotton farmers may face additional competition from imported supplies, making the balance between manufacturer costs and farm prices an important consideration.
Government Extends Cotton Import Duty Exemption by Two Months
The Department of Revenue under the Ministry of Finance issued Notification No. 35/2026-Customs on October 30, extending the existing exemption until December 31, 2026.
The amendment replaces the October 31 expiry date in the earlier notification with December 31. It does not introduce a new exemption or change the existing scope of the measure.
The original exemption was announced on May 30, 2026, and became effective on June 1. It was designed to improve cotton availability during the off-season and help textile manufacturers manage raw material costs.
The latest extension gives importers and manufacturers another two months to source eligible cotton under the existing duty-free arrangement.
| Particular | Details |
|---|---|
| Original announcement | May 30, 2026 |
| Original effective date | June 1, 2026 |
| Previous expiry date | October 31, 2026 |
| Extended expiry date | December 31, 2026 |
| Latest notification | No. 35/2026-Customs |
| Notification date | October 30, 2026 |
| Covered product | Cotton under tariff heading 5201 |
| Duties exempted | Customs duty and AIDC |
The notification was issued under Section 25(1) of the Customs Act, 1962, read with Section 124 of the Finance Act, 2021.
Which Import Duties Have Been Exempted?
The exemption covers the customs duty and Agriculture Infrastructure and Development Cess applicable to eligible cotton imports.
Before the temporary exemption, the combined import duty burden on cotton was generally 11%, comprising:
- Basic Customs Duty (BCD): 5%
- Agriculture Infrastructure and Development Cess (AIDC): 5%
- Social Welfare Surcharge (SWS): 1%
The original May notification exempted eligible cotton imports from the applicable customs duty and AIDC. The latest amendment extends that existing exemption rather than introducing a new rate or expanding the product coverage.
The covered goods fall under Customs Tariff Heading 5201, which refers to cotton that has not been carded or combed.
This distinction matters because the exemption should not automatically be interpreted as applying to every cotton-related product, processed textile material or finished garment. Importers must check the applicable tariff classification and notification conditions.
Why Has the Government Extended the Exemption?
The extension comes amid concerns about domestic cotton availability and firm prices.
Cotton prices generally ease when fresh crop arrivals begin in October. However, prices have remained relatively firm this year amid concerns that uneven monsoon rainfall could affect production.
India is one of the world’s largest cotton producers, but domestic production does not always meet the quantity, quality and specialised requirements of every textile manufacturer.
Textile mills may need particular cotton varieties or grades to meet production specifications and export orders. Imported cotton can help fill these supply gaps.
The government has therefore extended the exemption to support three broad objectives:
1. Improve raw material availability: Manufacturers can continue sourcing cotton from international suppliers without the specified import duties, giving them another source of supply.
2. Ease production costs: Lower import costs can help spinning mills and textile manufacturers manage expenses, particularly when domestic cotton prices remain high.
3. Support textile exports: More predictable access to raw materials can help manufacturers plan production and fulfil orders from international buyers.
The Ministry of Textiles has also highlighted the importance of supporting MSMEs, which may have less flexibility than larger manufacturers when raw material prices rise.
Textile Manufacturers and MSMEs Could Benefit
Cotton is a major input for India’s textile and apparel industry. It moves through several stages before becoming a finished product.
The supply chain includes cotton ginning, spinning, yarn production, weaving, knitting, dyeing, processing and garment manufacturing.
Higher cotton prices can increase costs at multiple stages of this chain. Spinning mills, for example, purchase raw cotton and convert it into yarn. If cotton becomes more expensive, their production costs can rise unless they can pass the increase on to buyers.
The extended exemption could provide some relief by allowing mills to compare domestic procurement costs with duty-free imported cotton.
Smaller manufacturers may particularly benefit because they often operate with tighter working-capital requirements and have less bargaining power when purchasing raw materials.
However, the actual benefit will depend on international cotton prices, exchange rates, shipping costs, import volumes and the quality of cotton required by manufacturers.
US, Brazil and Australia Could Gain From India’s Cotton Imports
The extension could also create additional opportunities for international cotton suppliers.
India can source cotton from countries including the United States, Brazil and Australia. Duty-free imports may improve the price competitiveness of these supplies compared with domestic alternatives.
Reuters reported that the extension could support additional cotton shipments from these countries.
For Indian textile manufacturers, access to multiple international suppliers can help reduce dependence on domestic availability during periods of tight supply.
However, imports are not automatically cheaper. International prices, freight, insurance, currency movements and delivery schedules all influence the final landed cost.
Manufacturers will therefore compare imported cotton with domestic supplies before deciding how much to procure from overseas markets.
What Does the Extension Mean for Indian Cotton Farmers?
The decision creates a balancing challenge for the government.
Textile manufacturers want affordable and reliable cotton supplies, while domestic farmers depend on remunerative prices for their crops.
When imported cotton becomes more competitive, mills may increase overseas purchases. Depending on the volume of imports and domestic supply conditions, this could place pressure on local cotton prices.
At the same time, the government has said it wants to balance the requirements of the textile industry with the interests of domestic farmers.
India also operates a minimum support price (MSP) mechanism for cotton. The Cotton Corporation of India undertakes procurement when market prices fall below the applicable MSP, subject to procurement conditions.
The impact of the extended exemption on farmers will depend on how much cotton enters the country, how domestic production develops and where market prices trade relative to MSP.
The policy therefore involves two connected objectives: maintaining affordable raw materials for manufacturers and protecting the economic interests of cotton producers.
How Long Will the Cotton Import Duty Exemption Last?
The exemption is now scheduled to remain in force until December 31, 2026, inclusive.
The government has not announced a further extension beyond that date. Any continuation would require another official decision or notification.
The two-month extension provides additional certainty to textile mills planning procurement and production for the final part of 2026.
Manufacturers will nevertheless need to monitor domestic crop arrivals, international cotton prices and any subsequent government announcements.
The Bigger Picture
The cotton duty exemption highlights the connection between agricultural production and India’s manufacturing competitiveness. Cotton prices affect more than farmers and spinning mills: they influence yarn, fabrics, garments and the cost structure of businesses throughout the textile value chain.
For manufacturers, the extension offers additional flexibility at a time when domestic prices have remained firm. For farmers, however, greater access to imported cotton could create additional competition. The overall effect will depend on import volumes, crop output and the relationship between domestic and international prices.
Looking Ahead
The next two months will be important for determining whether the extended exemption leads to higher cotton imports and greater price stability for Indian textile manufacturers. Fresh crop arrivals and international supply conditions will influence how much manufacturers rely on imported cotton.
The government will also need to consider the interests of domestic cotton farmers when deciding what happens after December 31. For now, the extension provides temporary cost relief and procurement flexibility to the textile industry, but it does not guarantee lower finished-product prices or a further extension into 2027.
Frequently Asked Questions
1. Until when has the government extended the cotton import duty exemption?
The government has extended the customs duty exemption on eligible cotton imports until December 31, 2026. The earlier deadline was October 31, 2026.
2. Which notification extended the cotton import duty exemption?
The Department of Revenue issued Notification No. 35/2026-Customs dated October 30, 2026, amending the earlier Notification No. 19/2026-Customs.
3. What was the import duty on cotton before the exemption?
The standard import duty burden was generally 11%, comprising 5% Basic Customs Duty, 5% Agriculture Infrastructure and Development Cess and 1% Social Welfare Surcharge.
4. Which cotton products are covered by the exemption?
The notification covers cotton classified under Customs Tariff Heading 5201, which refers to cotton that has not been carded or combed.
5. How will the extension benefit textile manufacturers?
It allows eligible cotton imports to continue without the specified customs duties and AIDC. This can improve raw material availability, provide more sourcing flexibility and help manufacturers manage production costs.
6. Will the extension reduce clothing prices in India?
Not necessarily. Lower cotton procurement costs could eventually reduce pressure on textile and apparel prices, but the impact depends on other expenses, market competition and whether manufacturers pass on the savings to consumers.
7. Does the cotton import duty exemption affect Indian farmers?
It could increase competition from imported cotton and potentially influence domestic prices. However, the actual impact will depend on import volumes, domestic crop production, market demand and MSP procurement.
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