The Finance Ministry has extended the exemption from the 11% customs duty on cotton imports to 31 December 2026. The earlier cut-off was 31 October. The Economic Times reported the change on 30 October1.
The ministry amended its 30 May 2026 customs notification to replace the October date with the December one. It issued the amendment under Section 25(1) of the Customs Act, 1962. It also cited Section 124 of the Finance Act, 20211.
The government said the extension would improve cotton availability for the textile sector and reduce input costs, while keeping farmers' interests in view, according to the ET report1.
What the relief covers
India waived the duty for five months from 1 June to 31 October to ease supplies in the lean season2. The extension keeps that relief in place to the end of the year1.
The published reports do not list the tariff lines covered. They also do not say whether the relief applies only to the basic customs duty or also to the cesses and surcharges levied on top of it. Buyers fixing contracts should read the amendment, or ask their customs broker, before they assume a zero-duty landed cost1, 2.
Why mills wanted it
Domestic cotton has stayed above 9,000 rupees per 100 kg, higher than the government's support price of 8,717 rupees for the new season2. Prices held firm even though new-crop arrivals usually soften the market from October2.
Stocks are tight. The stock-to-use ratio is about 31%, the lowest in five years, said Dipanshi Agarwal, principal analyst at S&P Global, according to BusinessLine2.
Imports have already risen. India bought $1.1 billion of cotton in April to September, up 63% from a year earlier, trade ministry data cited by BusinessLine showed2.
Duty is charged on the invoice value. In India, customs duty is calculated on the CIF value of the goods, which covers cost, insurance and freight3. With freight high, that base is larger, so the 11% is charged on a bigger number2, 3.
Currency adds to the bill. The rupee was at 94.95 to the dollar on 30 October, against 89.87 on 31 December 20254.
Even with the window open, a dealer with a global trading house said US cotton futures above 83 cents per pound, high freight and a weaker rupee could limit large imports2.
The test in January
The exemption ends on 31 December. Cargo cleared after that date faces the 11% duty again unless the government extends the window1, 2.
That makes the date of customs clearance, not the date of the contract, the number that matters. Shipping schedules, voyage time and port congestion decide whether a December shipment becomes a December bill of entry.
The Incoterm on the contract decides who carries that risk. Under DAP, the buyer clears customs in the destination country and pays the duties. Under DDP, the seller does3. A mill that buys on DDP depends on the seller's clearance timing. One that buys on DAP pays the duty itself, so a slip past 31 December lands on its own books3.
What comes next
Industry is already asking for more. Chandrima Chatterjee is secretary-general of the Confederation of Indian Textile Industry. She said India should remove the import tax for an extended period. It has only raised manufacturers' production costs, she said, and made it harder to compete with Vietnam and Bangladesh2.
The demand is on the government's table. The textiles ministry has taken up removal of customs duty on cotton with the Department of Revenue, as part of work on an integrated tax framework for the sector5.
Supply points the same way. Trade estimates put India's 2026-27 cotton output at under 29 million bales. Demand is more than 34 million bales2.
Analysts said extra imports could support global cotton prices and help cool domestic rates, though S&P Global's Agarwal cautioned that it could also weigh on domestic prices2.