Giving Temporary relief to the textile and garment industry amid concerns over revenue loss from higher US tariffs, the finance ministry on Monday removed the 11 per cent duty on raw cotton imports for a period of 42 days till September 30.
The exemption will benefit the textile chain — yarn, fabric, garments and made-ups — and provide relief to the textile industry and consumers. Through a notification by the Central Board of Indirect Taxes and Customs, the government removed the basic customs duty and the Agriculture Infrastructure and Development Cess (AIDC) on cotton imports from August 19 to September 30.
The removal of import duty on cotton was a long-pending demand of industry bodies such as the Confederation of Indian Textile Industry (CITI). This move is crucial in making the industry competitive, as it requires high-quality, contamination-free cotton to meet global quality compliance standards for exports. Removal of duty on raw cotton is expected to have a salutary effect on cotton prices in India.
CITI has long been requesting that the import duty on cotton be removed to help domestic cotton prices align with international prices. We, therefore, greatly welcome this measure taken by the authorities, even though the relief is only available temporarily,” said Chandrima Chatterjee, Secretary, CITI.
Although the move may not result in large gains through new shipments, industry players expressed hope that the exemption would be extended. It comes as an immediate confidence booster for the industry troubled by the higher US tariff of 50 per cent. Exporters have either halted shipments to the US or are fulfilling orders at a loss, while American retail giants including Walmart, Target, Amazon, TJX Companies, Kohl’s, Gap Inc., and H&M have asked their Indian suppliers to hold consignments until tariff clarity emerges.
India has set a target of achieving textile exports worth $100 billion by 2030. However, it is at a steep competitive disadvantage in the American market. While Bangladesh and Vietnam face tariffs of 20 per cent and Indonesia and Cambodia 19 per cent, India is saddled with 50 per cent. Even China, at 30 per cent, fares better. Exporters fear not only revenue losses but also the prospect of ceding market share once again to rivals.
The US is India’s largest market for textile and apparel exports. According to CITI, India’s exports to the US rose to $5.36 billion, up 12 per cent from $4.79 billion during the first six months of calendar 2024, ranking the country third. Vietnam, now the second-largest supplier, registered $8.54 billion worth of exports, a rise of 19 per cent. Bangladesh rebounded strongly after last year’s political turmoil with a 24 per cent surge to $4.36 billion. China, still the largest supplier, saw a 16 per cent decline to $9.34 billion.
