The two-month extension allows textile manufacturers to import cotton without basic customs duty and Agriculture Infrastructure and Development Cess amid domestic supply concerns and rising import dependence
The Centre has extended the customs duty exemption on imported cotton by two months until 31 December 2026, allowing textile manufacturers to continue sourcing raw material from overseas without the basic customs duty and Agriculture Infrastructure and Development Cess (AIDC).
The Department of Revenue, under the Ministry of Finance, issued Notification No. 35/2026-Customs on 30 October. The order amends Notification No. 19/2026-Customs, dated 30 May, and replaces the earlier exemption deadline of 31 October with 31 December 2026. Before the exemption, cotton imports attracted an effective import-duty burden of 11 per cent, comprising 5 per cent Basic Customs Duty (BCD), 5 per cent Agriculture Infrastructure and Development Cess (AIDC) and the applicable Social Welfare Surcharge (SWS).
The May notification exempted imported cotton under tariff heading 5201 of the Customs Tariff Act, 1975, from the applicable customs duty and the entire AIDC. The government initially provided the concession from 1 June to 31 October 2026. The latest notification extends the existing arrangement without changing its underlying provisions.
Relief For Textile Mills
The extension provides additional cost flexibility to spinning mills, fabric manufacturers and garment producers, for whom cotton prices constitute a significant component of raw material expenditure. The removal of import levies reduces the tax component of overseas procurement and gives manufacturers another sourcing option when domestic supplies do not meet their requirements at competitive prices.
Small and medium textile enterprises (SMEs), which have relatively limited capacity to absorb sharp fluctuations in input costs, are among the intended beneficiaries. The continuation of the concession also supports manufacturers that depend on imported fibre for production planning and supply commitments.
Domestic Supply Challenge
The extension comes amid concerns over domestic cotton availability. Industry estimates put India’s cotton output for the 2026-27 season below 29 million bales, against projected consumption of more than 34 million bales.
Domestic cotton prices have remained above Rs 9,000 per 100 kg, compared with the minimum support price of Rs 8,717 for the new season. India’s cotton imports rose 63 per cent year-on-year to USD 1.1 billion during the first six months of the current financial year.
Continued access to imported cotton can improve the cost position of textile manufacturers. However, greater overseas supply can also increase competitive pressure on domestic cotton producers, particularly if imported fibre offers more favourable prices.
