India has the unique advantage of the entire value chain for textile production vis-à-vis other nations which have to import fibre and yarn to meet their demands. In yet another push for the textile industry, the central government on Wednesday waived customs duty on cotton imports till September 30. The move is expected to benefit the industry and lower prices for consumers.
For years, the industry has been demanding a waiver in customs duty in order to lower domestic rates. As of now, the cotton imports attract 5 per cent Basic Customs Duty (BCD) and 5 per cent Agriculture Infrastructure Development Cess (AIDC).
The Central Board of Indirect Taxes and Customs (CBIC) notified the exemption from customs duty and agriculture infrastructure development cess for the import of cotton. The notification came into effect on April 14, 2022, and will remain in force up to and inclusive of September 30, 2022.
What is customs duty?
Customs duty refers to the tax imposed on goods when they are transported across international borders. In simple terms, it is the tax that is levied on the import and export of goods.
Amid the pandemic, the prices of the commonly used cotton variety have more than doubled to breach the Rs 90,000-mark per candy of 356 kg. Local cotton prices have also exceeded global rates by as much as Rs 1,500-2,000 per quintal.
Major cotton-producing nations- Vietnam and Bangladesh allow their industries to buy fibre from abroad at zero duty. Reportedly, this has favoured them and offered a substantial advantage in raw material costs, in addition to their duty-free access to critical markets like the US and the EU.