Cotton Duty Exemption Now Runs Until Dec 31| India Observers

However, the Central Government has decided to extend the customs duty exemption on import of cotton by two months. This will make the facility available till December 31, 2026. The move is intended to help in improving the supply of raw materials, reducing manufacturing costs, and benefiting India’s textile & garments industry, especially MSMEs.

This news was conveyed by the Ministry of Textiles via an announcement made by the Ministry of Finance’s Department of Revenue on October 30. The previous exemption was due to expire on October 31, 2026.

What Does the New Customs Duty Exemption Cover?

The notification of the extension has been done by Notification No. 35/2026-Customs, which modifies the previous Notification No. 19/2026-Customs dated May 30, 2026.

In terms of the revised notification, the exemption on cotton importations subject to Customs Tariff Heading 5201 will be available till December 31, 2026.

The exemption is granted for both the BCD and AIDC of the eligible cotton importation. This latest amendment in the notification has modified only the period of validity of the present exemption without introducing any new eligible commodities.

Why Has the Government Extended the Exemption?

Cotton is an important input material for the textile manufacturing industry in India. Availability and price of cotton affect production cost for the spinning industries, fabric manufacturers, garment makers, and exporters.

The government first granted the temporary tax exemption in May 2026 to increase the availability of cotton during the off-season and help manufacturers control their input costs.

The current extension is intended to ensure that imported cotton remains available at competitive prices, meeting specific raw material needs and adding value in the textile and apparel supply chain.

The government has also stressed the importance of balancing the needs of textile manufacturers with the interests of the domestic cotton growers.

Relief for Textile Manufacturers and MSMEs

This two-month extension is likely to offer more flexibility to companies relying on imported cotton. The spinning units and garment producers are able to import exempted cotton and do not have to pay the exempted duties in November and December.

Small and medium-sized businesses may be especially favored by the reduction in cost of inputs since the cost of raw materials constitutes a major portion of the total cost of production for such businesses.

This may even offer an opportunity to exporters to compete effectively in international markets. However, the extent of consumer benefits would depend on costs of procurement, manufacturing, and market conditions.

What Happens Next?

The exemption shall continue to be available till December 31, 2026, unless the government makes another amendment in its regard.

The ruling will provide some degree of temporary certainty to the cotton importers and textile producers while planning their purchases and productions for the rest of the year. Its further implications will largely depend on the availability of cotton within the country.