Setting-up of Manufacturing Unit Under MOOWR Scheme

The Government of India, in an initiative to encourage local manufacturing, revamped the earlier ‘Manufacturing & Other operation in Warehouse Regulation’ (MOOWR) scheme, which was first introduced in 1966 under the Customs law. MOOWR allows the owners of the warehoused goods to carry on manufacturing processes or other operations in such a warehouse, subject to specific conditions. The said scheme has been given a fresh impetus by liberalizing certain key compliance requirements in the revised MOOWR, 2019, notified on 1 October 2019 to align with the ‘Atmanirbhar Bharat’ plan of the Government.

The revised scheme has caught the eyeball of many corporates in India, who cater not only to international markets, but also to domestic customers. Some large multinational companies are seriously considering this option given the distinct advantage and ease of administration, unlike other export formats.

When the raw materials or capital goods are imported, the import duty on them is DEFERRED. If these imported inputs are utilized for exports, the deferred duty is also EXEMPTED. Only when the finished goods are cleared to the domestic market, import duty is required to be paid on the imported raw materials used in the production. Import duty on capital goods is required to be paid when such capital goods are cleared to the domestic market.

Salient features of MOOWR, 2019

Deferred Duty on Import of Raw Material: Until the clearance of finished Goods, duty on import of raw material used in manufacturing or other operations is deferred. It will be waived in case finished goods are exported.

Deferred Duty on Capital Goods: Until the clearance from a bonded facility, duty on capital goods used in manufacturing or other operations, is deferred, and can be avoided if they are exported.

Seamless transfer between Warehouses: A licensee shall transfer warehoused goods from one bonded facility to another without payment of duty. The liability to pay deferred duty is also transferred to the owner of the new facility with the transfer of goods.

No Export Obligation: An entity may sell 100% of the goods manufactured in the bonded Warehouse into the domestic market. However, the liability to pay duty on imported inputs would follow.

Appointment of warehouse keeper: The responsibility of the proper officer to oversee the operations of a warehouse, has been shifted to a self-appointed warehouse keeper.

Eligibility & Procedure to obtain a license under MOOWR, 2019

Under the new MOOWR, the following persons are eligible to apply and operate under these regulations:

• A person who has been granted a licence for a warehouse under section 58 of the Customs Act, in accordance with Private Warehouse Licensing Regulations, 2016.

• A person who applies for a licence for a warehouse under section 58 of the Customs Act, along with permission for undertaking manufacturing or other operations in the warehouse under section 65 of the said Act.

An application is required to be submitted to the Principal Commissioner of Customs or the Commissioner of Customs along with an undertaking:

• To maintain accounts of receipt and removal of goods in digital form and furnish the same digitally to the bond officer on monthly basis

• To inform the input-output norms or any revision in the norms wherever considered necessary

• To execute a bond in the specified format

Salient operational benefits plus flexibility of the scheme:

• Easy and hassle-free online application process through a common application cum approval form.

• The Principal Commissioner of Customs or the Commissioner of Customs acts as a single point of contact for all approvals.

• Simplified digital record-keeping and monthly return filing of the receipt, storage, operations, and removal of the goods in the warehouse.

• A new manufacturing facility can be set up, or the existing unit can be converted into a bonded warehouse, irrespective of its location in India.

• Unlimited warehousing period for storage of capital or non-capital goods until clearance for home consumption without any interest liability.

• No physical control by custom authorities.

Certain key issues which await clarification are allowability of depreciation on the used capital goods, relocation of EOU / SEZ under the scheme, and certain procedural relaxations in terms of compliance with allied Acts. While the scheme appears industry-friendly, clarity on these aspects can make the scheme more agile and bring about certainty for the industry and the investors.