Government Extends Cotton Import Duty Exemption to December 31 as Domestic Supply Tightens

The Central Government has extended the customs duty exemption on cotton imports by two months to 31 December 2026, through Notification No. 35/2026-Customs dated 30 October 2026. The exemption, originally available from 1 June to 31 October 2026, covers Basic Customs Duty and the Agriculture Infrastructure and Development Cess on cotton under Customs Tariff Heading 5201. The extension aims to augment raw material availability for the textile sector amid concerns over tighter domestic supply following a likely decline in production in the 2026-27 season due to reduced acreage and drought conditions in key producing states.

<p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The Ministry of Finance has extended the customs duty exemption on cotton imports by two months, from the earlier deadline of 31 October to 31 December 2026, through Notification No. 35/2026-Customs dated 30 October 2026 . The exemption, issued under Section 25(1) of the Customs Act, 1962, covers the Basic Customs Duty and the Agriculture Infrastructure and Development Cess on cotton falling under Customs Tariff Heading 5201, and amends the original notification of 30 May 2026 that had granted the relief for the period from 1 June to 31 October 2026 .<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2330823&reg=48&lang=2" target="_blank" rel="noreferrer" aria-label="1" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://taxguru.in/custom-duty/government-extends-customs-duty-exemption-cotton-imports-31-december-2026.html" target="_blank" rel="noreferrer" aria-label="8" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The decision responds to a tightening domestic supply situation. Production in the 2026-27 season is likely to decline on account of a dip in acreage and drought conditions in key producing states such as Maharashtra and Karnataka, which have hurt crop prospects . While the new crop has started arriving in markets, prices are ruling firm amid weak arrivals, with daily raw cotton arrivals in the range of 70,000 to 80,000 bales of 170 kg each—below trade expectations—and farmers holding back produce in anticipation of better prices . Cumulative arrivals until 23 October stood at 15 lakh bales, while consumption is estimated at 23 lakh bales, according to CotYarn estimates .<a href="https://www.thehindubusinessline.com/economy/agri-business/centre-extends-duty-exemption-on-cotton-imports-till-dec-end/article71648202.ece" target="_blank" rel="noreferrer" aria-label="15" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The duty exemption is intended to enable textile mills to source cotton from overseas at competitive prices, reduce input costs, and improve the competitiveness of Indian textile and apparel exports . The Ministry of Textiles stated that the measure is expected to provide greater flexibility to manufacturers in meeting raw material requirements, support Micro, Small and Medium Enterprises, and strengthen the competitiveness of Indian textiles in domestic and international markets . The relief applies to imports of cotton classified under Heading 5201 and covers the whole of the customs duty leviable under the First Schedule to the Customs Tariff Act, 1975, together with the applicable AIDC .<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2330823&reg=48&lang=2" target="_blank" rel="noreferrer" aria-label="1" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><a href="https://taxguru.in/custom-duty/government-extends-customs-duty-exemption-cotton-imports-31-december-2026.html" target="_blank" rel="noreferrer" aria-label="8" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The extension has implications for the domestic market as well. The relief is likely to weigh on domestic cotton prices, which had rebounded in recent weeks . Farmers who have been holding back produce in expectation of higher prices may face a less favourable pricing environment as imported cotton becomes more competitive. The government's original measure in May 2026 was framed as balancing the interests of cotton farmers and the textile industry, and the extension continues that balancing act by prioritising raw material availability for the downstream value chain .<a href="https://taxguru.in/custom-duty/government-extends-customs-duty-exemption-cotton-imports-31-december-2026.html" target="_blank" rel="noreferrer" aria-label="8" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">For India's textile and apparel export sector, the extension provides continuity at a time when global trade conditions remain uncertain. The sector is a significant contributor to India's merchandise exports and a major employer, particularly in states like Tamil Nadu, Gujarat, and Maharashtra. The availability of duty-free imported cotton allows mills to blend domestic and imported fibre to meet quality specifications and price points, and it reduces the risk of production disruptions if domestic arrivals fall short of demand. The extension also supports the government's broader objective of enhancing value addition across the textile value chain, as stated in the PIB release .<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2330823&reg=48&lang=2" target="_blank" rel="noreferrer" aria-label="1" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">The timing of the notification is notable. It was issued on 30 October 2026, one day before the original exemption was set to expire, providing importers with limited lead time to plan their shipments. The notification replaces the figures and words "31st day of October, 2026" with "31st day of December, 2026" in the original notification, a straightforward amendment that extends the relief without changing the covered goods or the scope of the duty relief . Importers filing Bills of Entry should verify tariff classification, eligibility, and the applicable exemption notification.<a href="https://taxguru.in/custom-duty/government-extends-customs-duty-exemption-cotton-imports-31-december-2026.html" target="_blank" rel="noreferrer" aria-label="8" style="color: rgb(57, 100, 254); transition: box-shadow 0.2s cubic-bezier(0.4, 0, 0.2, 1); border-color: rgba(255, 255, 255, 0); border-width: 2px 3px; margin-left: -3px; margin-right: -3px; text-decoration: none; position: relative;"></a><p class="ds-markdown-paragraph" style="margin: 16px 0px; color: rgb(15, 17, 21); font-family: quote-cjk-patch, Inter, system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Oxygen, Ubuntu, Cantarell, "Open Sans", "Helvetica Neue", sans-serif; font-size: 16px;">Looking ahead, the durability of the duty exemption will depend on the trajectory of domestic cotton production and prices. If the new crop arrivals pick up after Diwali and prices moderate, the pressure for continued relief may ease. If production disappoints further and prices remain elevated, the government may face calls for a further extension beyond December. For now, the extension provides the textile industry with a two-month window of certainty on input costs, and it signals that the government is prepared to intervene when domestic supply conditions warrant.

Government Extends Cotton Import Duty Exemption to December 31 as Domestic Supply Tightens

Haulage Times Daily Intelligence