Govt extends duty-free cotton imports till Dec 31 to aid textile exporters
Aug 28, 2025
The Finance Ministry has extended duty exemption on cotton till December 2025 to ease raw material supply, support garment exporters and cushion the impact of US tariffs on RMG
The government on Thursday extended the exemption from import duty on cotton until December 31, 2025, to support the domestic textile sector.
“In order to support exporters further, the Central government has decided to extend the import duty exemption on cotton (HS 5201) from September 30, 2025 till December 31, 2025,” the Press Information Bureau said in a statement.
The exemption, first announced by the Finance Ministry for the period August 19 to September 30, 2025, was aimed at improving the availability of raw cotton and easing pressure on exporters.
The relief covers the 5 per cent Basic Customs Duty (BCD), the 5 per cent Agriculture Infrastructure and Development Cess (AIDC), as well as a 10 per cent Social Welfare Surcharge on both. Together, these levies had earlier resulted in a combined duty burden of around 11 per cent on cotton imports.
The extension is expected to benefit India’s readymade garment (RMG) sector, which is currently grappling with external headwinds. From August 27, 2025, the US imposed a 50 per cent tariff on RMG imports from India, significantly denting export prospects. According to Crisil Ratings, India’s RMG revenue growth is now expected to halve to 3–5 per cent this fiscal as shipments to the US decline sharply.
So far, Indian exports had shown resilience. In the first quarter of FY26, total RMG exports grew by around 10 per cent to $4 billion, with shipments to the US rising nearly 14 per cent year-on-year, as per Crisil Ratings. But industry officials warn that the new tariffs will squeeze orders in the coming months, with the impact felt most in labour-intensive small and medium units.
“Post 50 per cent tariffs, Indian exports to the US may be minimal, despite limited capacity of competing nations in value-added garments and lead time taken by big-box retailers in the US to re-align their sourcing arrangements. Overall, we expect the share of the US in India’s RMG exports to fall from 33 per cent last fiscal to 20–25 per cent this fiscal,” said Manish Gupta, Deputy Chief Rating Officer, Crisil Ratings.
At the same time, the domestic market is expected to provide some relief. Gautam Shahi, Director, Crisil Ratings, noted: “The domestic market for RMG, accounting for around three-fourths of the sector’s revenue, will continue to see steady revenue growth of 8–10 per cent this fiscal, fuelled by economic growth, interest rate cuts and tax reductions. This, in turn, will cushion the tariff blow and spur overall growth at the sector level, but at a slower pace than last fiscal.”
[The Business Standard]
