MOOWR Scheme: Unlocking Manufacturing Opportunities

Manufacturing and Other Operations in Warehouse (MOOWR) Regulation Scheme-Unlocking Opportunities

Summary:  The Manufacturing and Other Operations in Warehouse (MOOWR) Regulations scheme, introduced in 2019 under the Customs Act, 1962, allows manufacturing and other operations in bonded warehouses, offering numerous benefits to manufacturers. Eligible businesses can defer payment of Basic Customs Duty (BCD) and Integrated GST (IGST) on imported raw materials and capital goods until the finished goods are cleared for consumption. Additionally, manufacturers can enjoy duty waivers for goods exported from these warehouses. The scheme’s flexibility stands out as it does not impose export commitments, making it appealing to manufacturers targeting both domestic and international markets. Goods can also be transferred between bonded warehouses without incurring duties, and businesses aren’t required to maintain positive Net Foreign Exchange Earnings (NFE). However, the scheme presents certain challenges, such as the lack of an online portal for regulatory submissions, the inability to claim depreciation on imported capital goods, and exclusion from other export incentive programs like the Drawback and RoDTEP schemes. Despite these challenges, the MOOWR scheme provides long-term licenses, no storage time limits for inputs, and significant tax benefits, which could help boost India’s manufacturing sector if properly streamlined.

Introduction to Manufacturing and Other Operations in Warehouse Regulations

The Manufacturing and Other Operations in Warehouse (MOOWR) Regulations scheme was introduced vide Notification No. 44/2019-Customs (N.T.) dated 19 June 2019 with the aim of allowing manufacturing and other operations in a bonded manufacturing facility which can significantly aid India to be recognized as the global manufacturing hub.

India has emerged as one of the most promising destinations not only for investments but also for ease of doing business. India currently at 63^rd position (2019) in ‘World Bank’s Ease of Doing Business Ranking 2020’[1]. With the objective of ease of doing business and to further foster the initiative of ‘Make in India’, section 65 of the Customs Act, 1962, provides for manufacturing as well as conducting other operations in a bonded warehouse by the owner of such warehoused goods.

Eligibility for Manufacturing and Other Operations in Warehouse Regulations

It is pertinent to note that only below mentioned persons are eligible to apply for manufacture and other operations in bonded warehouse:

• A person who has been granted a license for a warehouse under Section 58 of the Customs Act, in accordance with Private Warehouse Licensing Regulations, 2016.
• A person who applies for license for a warehouse under Section 58, along with permission for undertaking manufacturing or other operations in the warehouse under Section 65 of the Act.

Key Benefits under MOOWR scheme

The scheme provides for significant benefits which are listed below:

• Deferral in payment of Basic Custom Duty (BCD) & Integrated Goods and Services Tax (IGST)

The scheme allows to defer the payment of BCD and IGST (without interest) on import of raw materials and capital goods for undertaking manufacturing and other operations in bonded manufacturing warehouse till the finished goods are cleared for home consumption by filing of Bill of Entry (BOE). The deferral in payment of BCD and IGST can significantly aid in administering the company’s working capital.

• Waiver from payment of BCD & IGST

The scheme allows for a waiver from payment of BCD and IGST if the goods manufactured, i.e., finished goods, are cleared for exports from such a manufacturing facility.

• No hassle of export commitment

This is one of the most promising features of the MOOWR scheme which does not mandate the manufacturer with any export obligation unlike other existing schemes such as Advance Authorization (AA), Export Promotion Capital Goods (EPCG) etc. making it desirable for manufacturers to cater domestic as well as international markets. The benefit is also extended to the manufacturers even if 100% supplies are in the Domestic Market.

• Warehouse to Warehouse transfer

The scheme provides for the transfer of goods from one bonded warehouse to another bonded warehouse without payment of duty.

• Non-maintenance of Positive Net Foreign Exchange Earnings (NFE)

The scheme does not mandate the manufacturer to maintain positive NFE unlike other schemes.

• Validity of license

The license once obtained is valid for perpetuity unless cancelled. There is no hassle of periodic renewals.

• No time limit for storage of inputs and capital goods in warehouse

In case of manufacturing, the imported inputs & capital goods can be stored in the warehouse without any time restrictions that too without any interest.

Challenges under MOOWR scheme

Although there are benefits available in the scheme as specified above, there are even practical challenges faced by the entrepreneurs, few of which are listed below:

• Non-availability of online portal for submission of details as specified under the regulation resulting in operational difficulties.
• The benefit of claiming depreciation is not allowed on the capital goods imported under MOOWR scheme.
• No benefit of Drawback & Remission of Duties and Taxes on Export Products (RODTEP) scheme to the unit’s operating under MOOWR scheme.
• Lack of awareness about the scheme amongst trade and tax authorities.

Application of License for a Private bonded warehouse and Permission for Manufacturing and Other Operations

The application for license for a Private bonded warehouse can be made online on www.investindia.gov.in in Annexure A to Commissioner of Customs providing the details pertaining to nature of manufacturing, particulars of imported inputs, anticipated trade volume etc. along with other necessary documents as required. Further, a bond as per Annexure C needs to be executed and physical copy of the same to be submitted to the Jurisdictional Commissioner of Customs. However, before execution of a Bond, a Customs Officer may visit the facility to evaluate the compliances in order to issue the license. On review of documents, the Commissioner of Customs may grant the license for a Private bonded warehouse and Permission for Manufacturing and Other Operations.

Conclusion

To summarize, the MOOWR Scheme though offers valuable benefits which can significantly aid in administering the working capital and increase tax efficiency, it also poses certain practical challenges which needs to be streamlined which will enable more and more companies to pursue MOOWR scheme for boosting manufacturing sector in India.

Views expressed by the author are personal.

[1] Doing Business 2020: World Bank Report