India Removes 11% Import Duty on Cotton Until 30th September 2025

Government scraps Basic Customs Duty, AIDC, and Social Welfare Surcharge on raw cotton imports to stabilize prices, reduce input costs, and boost textile exports.

In a significant move aimed at stabilizing domestic cotton prices and bolstering the Indian textile industry, the Government of India has announced the exemption of all customs duties on raw cotton imports, effective from 19th August 2025 until 30th September 2025. This decision comes at a crucial time when the industry has been facing rising domestic prices and supply constraints.

This exemption includes the removal of the 5% Basic Customs Duty (BCD), the 5% Agriculture Infrastructure and Development Cess (AIDC), and the 10% Social Welfare Surcharge, which is levied on both BCD and AIDC. Together, these components added up to an effective 11% import duty on cotton. By eliminating this cumulative duty, the government intends to reduce the input cost across the textile value chain—including yarn, fabric, garments, and made-ups—thus providing much-needed relief to both manufacturers and consumers.

• Basic Customs Duty (BCD): A standard duty levied on imported goods to protect domestic industries.

• Agriculture Infrastructure and Development Cess (AIDC): Introduced in the Union Budget 2021–22, AIDC is an additional customs/excise duty used to finance agricultural infrastructure and related development expenditures. It is also imposed on commodities like petrol and diesel.

• Social Welfare Surcharge: A surcharge on customs duties (not on the product directly), intended to fund social welfare schemes.

The step was officially notified by the Central Board of Indirect Taxes and Customs (CBIC) and is in response to persistent demands from stakeholders in the textile sector.

The primary objectives of this exemption are to:

• Enhance the availability of raw cotton in the domestic market,

• Stabilize cotton prices, thereby reducing inflationary pressures on finished textile goods,

• Support the export competitiveness of Indian textiles by lowering production costs,

• Protect small and medium enterprises (SMEs) in the textile sector, which are more susceptible to price volatility.

  • These are businesses with limited scale and revenue. In sectors like textiles, SMEs play a vital role in employment and local economic development but are more vulnerable to cost fluctuations.

This temporary relief is expected to have a positive and stabilizing effect on cotton prices, which in turn can benefit the broader textile and apparel ecosystem—a key contributor to India's employment and exports. The government emphasized that the duty exemption was enacted strictly in the public interest.

By scrapping the import duty and removing the AIDC on cotton, the government has not only responded to immediate industrial concerns but also taken a proactive step to ensure the long-term sustainability and competitiveness of India's textile sector on the global stage.

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