MOOWR Scheme: Purpose, Benefits, Eligibility and Application Process

The MOOWR Scheme basically means Manufacturing and Other Operations in Warehouse Regulations, 2019. It’s a government-instituted scheme under the Customs Act, 1962, with the objective of improving India’s manufacturing competitiveness by allowing raw material and capital goods imports duty-free into bonded warehouses. In these facilities, businesses are allowed to store, process, assemble, or manufacture the products without needing to pay the customs duty in advance. This duty is payable only when the goods are introduced into the domestic market.

Contrary to export-linked schemes, the MOOWR does not have any export obligations; thus, it gives flexibility to both domestic and export-oriented enterprises.

This scheme is aimed at reducing costs, improving cash flow, and encouraging the “Make in India” initiative.

Eligibility for MOOWR Scheme

The MOOWR Scheme is designed to be all-inclusive, flexible, and open to a wide range of entities. It has minimum and simple eligibility criteria so as to encourage manufacturing and value addition in India. Any entity that satisfies the following conditions is then qualified to apply for consideration under the scheme:

1. Any Legal Entity Engaged in Manufacturing or Value Addition

• Eligible applicants include a company, LLP, partnership firm, proprietorship, or any other legally registered business.
• An entity must intend to carry out manufacturing or other outlined operations, such as assembly, blending, packaging, labelling, testing, reconditioning, repair, etc., within a customs bonded warehouse.

2. Premises Suitable for Bonding

The applicant must have at their disposal a designated premise, owned or leased, which can be recognized as a customs-bonded warehouse. The premises must be secure and able to implement customs-compliant controls, including:

• CCTV surveillance
• Restricted entry/access
• Segregated storage
• Proper safety measures

3. Ability to Maintain Inventory and Compliance Systems

• There must be proper mechanisms for control of inventory, maintenance of records, and the capability for filing the necessary returns.
• There should be an IT system for tracking the receipt, storage, manufacturing, and removal of goods.

4. Import-Related Activities

• It must be designed to import raw materials, consumables, or capital goods that are to be stored in the warehouse.
• There are no minimum investment, turnover, or export requirements.

5. Financial Solvency

The applicant should be financially sound and capable of putting up a bond/security, as required by the relevant customs legislation.

6. Compliance with Customs Laws

The entity should not have any adverse compliance history with customs, GST, and other related laws.

Purpose and Objectives of the MOOWR Scheme

MOOWR Scheme is a part of the government’s effort to help “Make in India,” linking domestic manufacturing with global supply chains, and establishing a clear, internationally benchmarked system for deferring duties in a coherent manner.

Purpose of the MOOWR Scheme

1. Duty Deferment Mechanism: The main purpose of the MOOWR is to allow companies to import raw materials, consumables, and capital goods with no need to pay customs duty in advance. Duty shall be payable when the goods are cleared for domestic consumption, hence enhancing cash flow.
2. Encourage Low-Cost Manufacturing: The scheme significantly reduces the manufacturing cost by removing the requirement to pay immediate duty. This is particularly helpful for industries reliant on imported inputs or high-value machinery.
3. Encourage Industrial Expansion: The scheme is designed to assist companies in expanding their capacity or establishing new units without incurring substantial financial burdens. Since capital goods can be imported duty-free and retained indefinitely, the initial investment required for manufacturing is reduced.
4. Offer a Non-Mandatory Reward: Unlike SEZ, EOU, or EPCG schemes, the MOOWR does not entail any export obligations. It aims at treating domestic-market-oriented companies and exporters on an equal footing.
5. Improve Ease of Doing Business: The scheme simplifies compliance by eliminating complicated procedural details in order to reduce the burden on businesses, ensuring that only a few reports are required.

Objectives of the MOOWR Scheme

1. Strengthening India’s Global Competitiveness: To make India a preferred location for manufacturing by lessening the burden of taxes and providing inputs at competitive prices.
2. Facilitate Efficient Inventory and Supply Chain Management: To allow companies to keep imported merchandise in bonded warehouses indefinitely in order to improve production planning and encourage lean inventory strategies.
3. Allow Value Addition in India: To encourage local value addition by allowing manufacturing, assembly, blending, packaging, repair, and other activities in customs-bonded facilities.
4. Support Integration with Global Value Chains: To facilitate duty-free import, processing, and re-export, aligning India with international bonded warehouse frameworks and enhancing export competitiveness.
5. Promote Investment and Technology Adoption: To stimulate the adoption of cutting-edge machinery and technology by mitigating initial financial burdens through the duty-free importation of capital goods.

Application Process under the MOOWR Scheme

The application process is organised, focused on compliance, and commences with getting approvals from the relevant customs authorities in the jurisdiction.

1. Initial Assessment and Preparatory Work

Before filing an application, the applicant shall:

• Locate a place that shall serve as a customs-bonded warehouse.
• Provide appropriate security arrangements to include CCTV, access control, storage configuration, and infrastructure that meets customs standards.
• Collate requisite documents like ownership or lease agreements, layout plans, corporate documents, GST registration, and IEC information.
• Consider the type of intended operations (manufacturing, packaging, assembly, repair, etc.).

2. Filing Application for Private Bonded Warehouse (Section 58)

The applicant first applies for a license under Section 58 of the Customs Act, which allows an individual to establish a private bonded warehouse. The application is made to the Jurisdictional Commissioner of Customs, and the submissions include:

• Particulars of the premises and a blueprint
• Security measures are in place
• Proof of financial solvency
• Fire safety certificates
• Business registration documents

The premises will be inspected by customs officials to ensure suitability.

3. Request for Permission for Manufacturing/Operations (Section 65)

Following the grant of the Section 58 license, the applicant proposes permission for works to be undertaken within the warehouse. Submit the required Form and undertaking, as per the MOOWR Regulations. Submit:

• The nature of manufacturing or other operations
• Process flow details
• A list of raw materials and capital goods
• Expected waste norms
• Information about the inventory management system
• Customs can conduct another review to check readiness.

4. Performance of Bond and Security

Once all permissions are granted:

• The applicant executes a triple duty bond covering duty liability for the imported goods.
• Where required, provide a bank guarantee or security.

5. Post-Approval Compliance Setup

After approval:

• Install IT systems required for the tracking of inventory.
• Arrange for periodic filing of returns, physical verification protocols, and access to customs officers.

6. Commencement of Operations

Now, the unit can start importing goods duty-free and commence manufacturing/ operations under MOOWR supervision, with licences under Section 58 and Section 65 and bond execution complete.

Benefits of the MOOWR Scheme

The MOOWR scheme would avoid the upfront payment of customs duty, simplify procedures, and improve the cash flow for both domestic and export-oriented units.

1. Complete Duty Deferral on Imports

• Importation against this document would be allowed without payment of Basic Customs Duty (BCD), IGST, or Cess on raw materials, components, and capital goods.
• Duties are payable only at the time of clearance of the goods for the domestic market, consequently saving substantial amounts of working capital.
• Global bonded warehouse incentives are on these lines. This enhances India’s manufacturing competitiveness.

2. No Export Obligation

• Businesses can sell 100% of their products in the domestic market without any penalty, unlike under schemes like EPCG, EOU, or SEZ.
• This makes MOOWR appealing for companies catering to both domestic and international markets.

3. Deferred Duty on Capital Goods

• Capital goods imported for manufacturing can be stored in the warehouse indefinitely without payment of duties.
• No duty payment linked to depreciation is required as long as the goods remain within the bonded premises.
• It significantly reduces the initial costs involved in establishing new plants or expanding the existing capacity.

4. No Interest on Deferred Duty

• Unlike some duty deferment schemes, no interest is charged on the duties deferred under MOOWR.
• It further improves cash flow efficiency, reducing manufacturing operation costs.

5. Simplified Compliance and Ease of Doing Business

• No requirement for positive performance in net foreign exchange.
• The scheme avoids complex audit processes typical of SEZ or EOU zones.
• Filing requirements extend only to monthly returns and the maintenance of simple inventory records.
• The warehouse remains under the physical control of the business, with only regulatory oversight by customs.

6. Unlimited Storage Period

• Goods can be stored in the bonded warehouse with no time limits or deadlines.
• This allows flexibility in the planning of production and stock for the business concerned.

7. Flexibility of Manufacturing and Other Operations

• Units can perform a wide range of operations: manufacturing, blending, assembly, testing, repair, packaging, reconditioning, etc.
• The scheme covers a wide range of industries: electronics, automobiles, pharmaceuticals, chemicals, textiles, and engineering goods, among others.

8. Facilitates Global Supply Chains

• Business enterprises can import goods at a competitive price, add value in India, and re-export without a duty burden.
• This supports India’s ambition to become a global manufacturing and supply chain hub.

Conclusion

The MOOWR Scheme provides a simplified, flexible, and business-friendly regime catering to a wide range of eligible entities engaged in the manufacturing and value-addition activities. Its key objective is to ease the cost burden through deferral of duties, improve liquidity, and boost competitive manufacturing in India.

Substantial benefits accruing to MOOWR, the absence of export obligations, unlimited warehousing period, and import of raw materials and capital goods free of duty, constitute MOOWR as one of the major catalysts for the growth of industry and investment.