In a move to relieve textile exports from the steep 50 per cent US tariff, India has extended duty-free imports of cotton by three months, until December 31. The decision was announced through a government order on Thursday. The Finance Ministry had earlier allowed duty-free imports of cotton from August 19 to September 30. The exemption has now been extended until the end of December.
11% levy put on hold to give relief to cotton importers
The government release said, “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.”
This covers the waiver of the 5 per cent Basic Customs Duty (BCD), 5 per cent Agriculture Infrastructure and Development Cess (AIDC), and the 10 per cent Social Welfare Surcharge on both. Together, these had resulted in an effective 11 per cent duty on cotton imports, highlights PTI.
US tariff hike pushes duties above 60%
The extension comes at a time when US President Donald Trump’s decision to double tariffs on Indian imports has come into effect. The new levy of up to 50 per cent, combined with the existing Most Favoured Nation (MFN) duty, has pushed overall tariffs on key sectors such as garments, jewellery and leather to over 60 per cent.
The US is India’s biggest market for garments and jewellery, valued at nearly $22 billion in 2024. India holds a 5.8 per cent share in the US garment market, behind China (30 per cent), Vietnam (20 per cent) and Bangladesh (20 per cent). Now these countries are expected to get advantage as they are facing lower duty on the sector. Even Indonesia—ranked just below India as the sixth-largest exporter— may get a competitive edge over India as it is subject to only 19 per cent tariff.
Indian textile hubs such as Tiruppur, Surat and Ludhiana may face a slowdown as a result.
Lowering costs, stabilising prices
According to PTI, extending duty-free cotton imports will enhance raw cotton availability in the domestic market, stabilise cotton prices, and reduce inflationary pressure on finished textile products.
The exemption is expected to lower input costs across the textile value chain—from yarn to fabric, garments, and made-ups—and help small and medium enterprises (SMEs) remain competitive in global markets.