MOOWR Scheme: Key Benefits, Process & Limitations

The MOOWR Scheme (Manufacture and Other Operations in Warehouse Regulations, 2019), introduced under Section 65 of the Customs Act, 1962, is one step towards improving the ease of doing business in India. It allows manufacturers to import raw materials and capital goods without upfront payment of duties, and carry out operations within bonded warehouses. In this article, the author has tried to summarize the key benefits, procedure, and challenges of the MOOWR Scheme in a simple and practical manner for businesses.

MOOWR SCHEME FOR IMPORTER:

Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR Scheme)

• Background of the MOOWR Scheme:

• • The MOOWR Scheme was introduced under Section 65 of the Customs Act, 1962 to promote India as a global manufacturing hub and to simplify compliance requirements for businesses. It permits manufacturers to carry out manufacturing and other operations within a bonded warehouse while deferring customs duties and taxes.

• Under this scheme, the Central Board of Indirect Taxes and Customs (CBIC) allows manufacturers to import raw materials and capital goods without upfront payment of customs duties. Unlike other duty deferment schemes, MOOWR does not mandate any export obligation, making it highly beneficial for businesses supplying both to domestic and international markets.

• Key Advantages of the MOOWR Scheme:

• • Duty-free import of raw materials and capital goods.
  • Deferred payment of customs duty and IGST—payable only at the time of clearance for home consumption i.e. no customs duty on exports of manufactured goods.
  • One-time license with lifetime validity—no periodic renewals.
  • No interest on deferred duties for capital goods used and later cleared for home consumption.

• Unlimited storage time for imported goods within the bonded warehouse.

• • Simplified compliance with a single application covering both warehouse licensing and manufacturing permissions.
  • No duty is applicable on transfers between bonded warehouses.
  • Deferment of duty reduces working capital requirements and the associated interest costs.
  • No geographical restrictions—any facility in any corner of India can be converted into a bonded manufacturing unit whether existing or new.
  • No physical control by Customs authorities, reducing administrative burdens.
  • No minimum investment threshold required to avail of the scheme.
  • Goods can be procured in advance to meet peak demand during festive seasons.
  • Risks associated with shipping delays and related consequences can be avoided as goods are readily available in the warehouse.

• No Net Foreign Exchange (NFE) earning requirement.

• Eligibility for MOOWR Registration:

Entities eligible to apply for MOOWR include:

• Businesses holding a warehouse license under Section 58 of the Customs Act, 1962, in accordance with the Private Warehouse Licensing Regulations, 2016.
• Applicants seeking a combined license for warehousing under Section 58 and manufacturing permission under Section 65.
• Applicants must be Indian citizens or entities incorporated or registered in India.

• Deferred Duty Treatment:

Capital Goods

• Customs duty is deferred until goods are cleared for home consumption.
• If exported, the duty is waived completely.

Raw Materials

• Duty is deferred until the finished goods are sold domestically.
• If the finished goods are exported, no customs duty is payable on the imported inputs.

• Limitations of MOOWR Scheme:

Despite its many benefits, the MOOWR Scheme has some practical limitations:

• No depreciation benefit on capital goods at the time of removal from the bonded warehouse i.e. you have to pay the duty at original price of the capital goods.
• No Drawback or RoDTEP benefit is available on exports made under MOOWR.
• There is no dedicated online portal for submitting License, Monthly Returns etc. Documents related to the license and monthly returns must be submitted physically.

• Record Maintenance & Return Filing:

• Licensee must maintain records in the format prescribed under Annexure B. For Inward, Processing, Removal storage
• A Monthly return must be filed by the 10th of the following month detailing all transactions.

• Clearance of Resultant Products under MOOWR:

1. In Case of Export:

• A Shipping Bill or Bill of Export must be filed.
• A GST Invoice must be issued.
• No customs duty is payable on either the resultant product or the imported raw materials used.

1. In Case of clearance for home consumption (Domestic Sale):

• A GST invoice must be issued as per CGST/IGST laws.
• Applicable taxes (IGST or CGST+SGST) must be charged based on the place of supply.
• An Ex-bond Bill of Entry must be filed for clearance.
• Maintain input-output details as per Annexure B and Input-Output Norms (ION).
• Any consumption variations must be reflected in revised ION.

• Warehouse-to-Warehouse Transfer:

Transfer of resultant goods between bonded units is allowed:

• The Form prescribed for transfer of goods under MOOWR consists of two parts Part-A (Needs to be filed at the dispatch warehouse) and Part B (to be filled by the recipient to be Proper documentation)
• Due Intimation to the Bond Officer is required, and

• Compliance with relevant regulations.

• Clearance of Scrap/Waste:

• When scrap/waste is cleared for home consumption:

• • • Customs duty must be paid on the portion of imported inputs attributable to such scrap.

• When the resultant product is exported:

• • In case the scrap or refuse has been destroyed then no duty is required to be paid.
  • In case scrap or refuse is exported, duty must be paid as if the goods were originally imported in that form. The duty will be calculated based on the transaction value of the scrap.
  • All such activities must be recorded in Annexure B for compliance and other purposes.

• Surrender or Cancellation of License:

A licensee may voluntarily surrender or request cancellation of their bonded warehouse license by submitting a written application to the Principal Commissioner or Commissioner of Customs.

Conditions for cancellation/surrender include:

• All government dues must be cleared.
• A declaration stating that no goods are stored in the warehouse at the time of application, and none have been stored since the request date.
• No pending legal or regulatory proceedings under the Customs Act.

Upon satisfying the above conditions, the competent authority may approve the cancellation or surrender.

• The proposed amendment related to the MOOWR under Section 65A

• A new section 65A has been introduced in the Customs Act, 1962 (Customs Act) (vide Section 130 of the Finance Act, 2023) to provide that IGST and Compensation Cess would be payable on imported goods deposited in the Customs warehouse for carrying out manufacture and other operations (under section 65), as opposed to the current facility of complete exemption from all elements of customs duty. It is however very important to note that the effective date of the aforesaid amendment has not yet been notified till date.

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