F Fynvisor

MOOWR - Is it a move in the right direction?

28 May 2022

MOOWR — a backdrop

The Government of India, with a view to revamp and attract investments into India, launched a scheme under Section 65 of the Customs Act, 1962, viz. “Manufacture and Other Operations in Warehouse Regulations” (MOOWR). As the name suggests, under the scheme a unit can import goods (both inputs and capital goods) into a private bonded warehouse from a customs station without payment of duties, and use them in the manufacture of finished goods. The scheme aims to give an impetus to the government’s “Make in India” initiative through the benefits outlined below.

MOOWR — salient features

  • No minimum area requirement or geographical limitation on where such units can be set up
  • Remission of import duties if finished goods are exported; where finished goods are cleared for home consumption, there is deferral of import duty payment without any interest liability
  • The scheme allows procurement of GST-compliant goods from the domestic market for use in manufacture and other warehouse operations
  • A single digital account for ease of doing business and easy compliance
  • Duty on capital goods is payable only when they’re cleared for domestic consumption; if capital goods are exported or destroyed, they attract no import duties
  • No investment threshold, export obligation, or net foreign exchange earning obligation under the scheme
  • An existing warehouse can be converted into a private bonded warehouse, making entry into the scheme easy and flexible
  • Sending/receiving goods for job work is permitted without payment of duty
  • Procurement of GST-paid goods from the domestic market is allowed for use in manufacture and other operations
  • Oversight responsibility has shifted from the proper officer (as in other export-oriented schemes) to a self-appointed statutory warehouse keeper

How does MOOWR stand against other schemes?

While MOOWR offers real advantages, they don’t by themselves settle which scheme to opt for — as with any scheme, there are benefits available under EOU/SEZ that MOOWR doesn’t offer:

  • Excise duty and CST exemption/refund on procurement of fuel from DTA
  • Service export units are not permitted under MOOWR
  • Prohibited goods cannot be exported under the scheme
  • A DTA supplier can avail duty drawback or Advance Authorisation on supplies to an EOU

Since duty drawback is available to the supplier of an EOU unit, exports are effectively tax-free — but there’s no refund of taxes on domestic inputs to a MOOWR unit. This effectively means the MOOWR scheme may not be advisable for imports where domestic raw material consumption is high relative to imported materials.

It’s important to analyse the benefits offered by each scheme against your own fact pattern and the applicable scheme, including a cost-benefit analysis — as they say, the devil lies in the details.