Textile exports: India extends duty-free cotton imports by 3 months; relief for exporters hit by US tariffs

The government on Thursday announced a three-month extension for duty-free cotton imports, allowing the benefit to continue until December 31 to aid textile exporters hit by 50 percent US tariffs."In order to support exporters further, the Central government has decided to extend the import duty exemption on cotton (HS 5201) from 30th September 2025 till 31st December 2025,” the finance ministry stated on Thursday. The ministry had previously approved, on August 18, duty-free cotton imports for the period from August 19 to September 30.The extension includes an exemption that covers 5 percent Basic Customs Duty (BCD), 5 percent Agriculture Infrastructure and Development Cess (AIDC), and the 10 percent Social Welfare Surcharge, which together previously amounted to an 11 percent import duty on cotton, as cited by PTI.The measure is expected to reduce input costs across the textile value chain, including yarn, fabric, garments, and made-ups, offering much-needed relief to both manufacturers.From August 27, the US imposed a 50 per cent duty on Indian goods, including textiles, gems and jewellery, and leather.India’s garment exports total around $35 billion annually, with roughly a third, about $12 billion, destined for the US market. About 25 percent of the country’s cloth production is exported, while the remaining 75 percent serves domestic consumption.The 50 percent sanctions are expected to push international prices of Indian cotton even higher than their pre-tariff levels.The cotton market is also under domestic pressure, as Indian traders are sourcing from other countries offering lower prices. While India imposes an 11 percent import duty on cotton, mills engaged in significant direct exports can procure it under an open licence at a reduced duty of 4.4 percent.The current duty exemption is expected to boost the supply of raw cotton in the domestic market, stabilise prices, and ease inflationary pressures on finished textile goods. It is also set to enhance the export competitiveness of Indian textiles by lowering production costs and safeguarding small and medium enterprises (SMEs) in the sector.