Duty-Free Cotton Imports Extended Till 31 December 2026: Customs Exemptions and India's Cotton Economy
The Union Ministry of Finance has extended the exemption from customs duty on cotton imports till 31 December 2026. The earlier exemption was to end on 31 October 2026.
The change was made through Notification No. 35/2026-Customs, dated 30 October 2026. It amends Notification No. 19/2026-Customs of 30 May 2026, which had first given a five-month exemption.
The notification uses the government's power under Section 25(1) of the Customs Act, 1962, read with Section 124 of the Finance Act, 2021 (the law that created the Agriculture Infrastructure and Development Cess). So both the basic customs duty and the cess on cotton are waived.
The stated aim is to improve the supply of raw cotton for the textile and clothing industry, lower input costs, and help small and medium enterprises, while keeping the interests of domestic cotton farmers in mind.
Normally, raw cotton imports attract a total duty of about 11%.
Cotton Cultivation in India
Cotton is a plant grown for the soft white fibre around its seeds. This fibre is spun into yarn and woven into cloth. Cotton is India's most important fibre crop and a kharif crop (sown with the monsoon). India has the largest area under cotton in the world and is the second-largest producer and consumer of cotton, after China. Millions of farmers, many of them small farmers in dry areas, depend on it for their income.
India grows a lot of cotton but its yields are low and some grades, like ELS cotton, are in short supply. Duty-free imports help mills get enough fibre at lower cost. The government limited the window to December 2026, partly because domestic farmers are selling the new kharif crop (harvested from October) and need fair prices backed by CCI's MSP buying.
Customs Duty in India: Basic Customs Duty, Cess and the Effective Rate
Customs duty is a tax the government charges on goods crossing India's border, mostly on imports. The main part is the Basic Customs Duty (BCD), with rates listed in the Customs Tariff Act, 1975. On top of BCD, cesses like the Agriculture Infrastructure and Development Cess (AIDC) and the Social Welfare Surcharge (SWS) can be added. The total of all these is the "effective rate" an importer actually pays.
Notification No. 35/2026-Customs uses the Section 25(1) exemption power to keep the 11% duty on cotton at zero for two more months. Because it is a notification and not a change in the tariff law, the government can switch the duty back on quickly when the waiver ends.
India's Textile Sector: Strategic Importance and Policy Framework
India's textile sector covers the whole chain from growing cotton and other fibres to spinning, weaving, processing and making garments. It is one of India's largest employers after agriculture and a major source of exports. Cotton is its main raw material, so the price and supply of cotton directly decide how competitive Indian mills and garment makers are.
The duty waiver is meant to lower the input cost for spinning mills and garment makers, especially MSMEs, so they can stay competitive in export markets.
- Cotton import duty exemption extended: from 31 October 2026 to 31 December 2026
- Notification No. 35/2026-Customs dated 30 October 2026, amending Notification No. 19/2026-Customs dated 30 May 2026
- Legal basis: Section 25(1), Customs Act, 1962, read with Section 124, Finance Act, 2021 (AIDC)
- Normal duty on raw cotton: about 11% (5% BCD + 5% AIDC + SWS)
- MSP 2026-27: ₹8,267/quintal (medium staple), ₹8,667/quintal (long staple)
- CCI bought about 104 lakh bales at MSP in 2025-26