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- 18 Apr 2022
- ICICIdirect Research
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GOVERNMENT EXEMPTS CUSTOMS DUTY ON COTTON IMPORTS TILL SEPTEMBER 30, 2022
News: The central government has exempted cotton imports from 5% basic customs duty and 5% agriculture and infrastructure development cess. The duty relief will be effective till September 30, 2022 and will apply to the textile value chain including yarn, fabric, garments and made ups
Views: The move is also expected to benefit textile exports as they do not have to seek refund of the taxes on raw materials under export promotion schemes. We believe that the duty free import would aid Indian companies to import cotton at lower than domestic prices (as international price is currently lower than domestic cotton price) and thereby aid in stabilising the cotton prices which have surged to all-time high levels. Also import of raw cotton will promote export of value-added cotton textile. The duty cut is positive for the entire textile value chain and will push export of apparels significantly by softening the prices of yarn and fabrics as well. Further, it would aid in improving the international competitiveness of Indian textile companies as high prices of cotton were blunting the competitive edge of the industry. In our coverage universe we expect KPR Mills, Gokaldas Exports and Vardhman Textiles to be the beneficiary of the cut in import duty and agricultural cess on cotton
Impact: Positive