Which Customs Duty Benefit Scheme is Best Suited to Your Business? EPCG vs Advance Authorisation vs MOOWR vs IGCR

The Government of India has introduced various initiatives to promote domestic manufacturing, encourage exports and improve the global competitiveness of Indian businesses. These initiatives aim to reduce production costs, encourage investment and make Indian products more competitive in domestic and international markets.

Customs duty on imported machinery, capital goods, raw materials and components can significantly increase manufacturing costs. For businesses that depend on imported goods, these duties can also create a substantial working capital requirement.

To address these challenges, the Government provides various schemes under the Foreign Trade Policy and the Customs Act, 1962. These schemes enable eligible businesses to import specified goods at exempt or concessional rates of customs duty, or defer duty payment, subject to applicable conditions.

Four important schemes that businesses should evaluate are:

• Export Promotion Capital Goods (EPCG) Scheme

• Advance Authorisation Scheme

• Manufacture and Other Operations in Warehouse (MOOWR) Scheme

• Import of Goods at Concessional Rate of Duty (IGCR) Scheme

Although all four schemes can help businesses reduce or manage their customs duty burden, they differ in their objectives, eligibility requirements, duty treatment and compliance obligations.

Choosing the right scheme can help a business reduce import costs, improve cash flow and plan its manufacturing and export operations more efficiently.

1. Foreign Trade Policy Schemes

The EPCG and Advance Authorisation Schemes operate under India's Foreign Trade Policy. Both are designed to support eligible businesses, particularly those engaged in export activities.

A. EPCG Scheme – Export Promotion Capital Goods Scheme

The EPCG Scheme facilitates the import of eligible capital goods at zero customs duty under the applicable framework, subject to fulfilment of the prescribed export obligation and other conditions.

Capital goods may include eligible machinery, equipment, tools, moulds, dies and other items covered by the scheme.

Under the applicable customs exemption framework, eligible imports may qualify for exemption from specified customs duties, including Basic Customs Duty (BCD), Integrated Goods and Services Tax (IGST) and Compensation Cess, where covered by the relevant notification.

Key benefits of the EPCG Scheme

• Reduced capital expenditure: Eligible machinery can be imported with substantial customs duty savings.

• Improved manufacturing capacity: Businesses can invest in modern machinery and technology at a lower initial cost.

• Support for export growth: The scheme encourages investment in capital goods used to manufacture products or provide services for export.

• Technology upgradation: Businesses can invest in advanced production equipment to improve efficiency and productivity.

Export obligation and compliance

Under the standard EPCG framework, the specific export obligation is generally equivalent to six times the duties, taxes and cess saved, to be fulfilled within six years from the date of issue of the authorisation. Applicable average export obligation requirements and other conditions must also be considered.

The precise requirements depend on the applicable Foreign Trade Policy provisions, the authorisation and the relevant customs notification.

Businesses should carefully assess their projected export performance before applying. Failure to fulfil the prescribed export obligation may result in duty recovery, interest and other consequences under the applicable provisions.

Who should consider EPCG?

The scheme may be suitable for:

• Manufacturers importing machinery for export-oriented production.

• Existing exporters expanding their manufacturing capacity.

• Businesses investing in advanced production technology.

• Eligible service providers importing capital goods for export services.

EPCG is particularly relevant for businesses planning substantial investments in capital goods and expecting to generate sufficient exports to meet their obligations.

B. Advance Authorisation Scheme

The Advance Authorisation Scheme allows eligible exporters to import specified inputs without payment of the applicable customs duties covered by the relevant exemption framework, subject to prescribed conditions.

These inputs are intended for use in manufacturing products for export. Depending on the applicable provisions, eligible inputs may include raw materials, components, consumables and other permitted items.

The scheme is particularly relevant for businesses that regularly import raw materials and components to manufacture finished products that are subsequently exported.

Key benefits of Advance Authorisation

• Reduced input costs: Eligible inputs can be imported without payment of the duties covered by the applicable exemption.

• Improved export competitiveness: Lower input costs can help businesses offer more competitive prices in international markets.

• Efficient production planning: Authorisations can be structured around eligible inputs and export products.

• Working capital support: Savings on applicable import duties can reduce the initial cash outflow associated with eligible inputs.

Export obligation and compliance

Advance Authorisation carries an export obligation linked to the authorised inputs and the corresponding export products. Applicable value-addition requirements must also be fulfilled where prescribed.

Businesses must comply with the relevant input-output norms, export obligation period, authorisation conditions and customs exemption requirements.

Who should consider Advance Authorisation?

The scheme may be suitable for:

• Manufacturers exporting finished products made using imported raw materials.

• Engineering and electronics exporters importing eligible components.

• Businesses with recurring requirements for imported production inputs.

• Exporters seeking to reduce the customs duty component of their input costs.

Advance Authorisation is generally more relevant to eligible inputs used in export production than to machinery imported for general manufacturing purposes.

2. Customs Schemes

The MOOWR and IGCR frameworks operate under the Customs Act, 1962, and the associated rules and notifications. They are relevant to businesses seeking customs duty deferment or concessional duty treatment for specified imports.

A. MOOWR Scheme – Manufacture and Other Operations in Warehouse

The MOOWR Scheme enables eligible businesses to import goods into a licensed bonded warehouse and undertake permitted manufacturing or other operations under Section 65 of the Customs Act, 1962, subject to applicable conditions.

The manufacturing facility must obtain the required private warehouse licence and comply with the applicable bonded warehousing requirements.

Unlike schemes that provide a specified duty exemption at the time of import, MOOWR primarily provides for the deferment of customs duty on eligible imported goods while they remain warehoused. The final duty treatment depends on how the goods are used, processed or cleared.

How does MOOWR work?

1. Import of capital goods

Eligible capital goods can be imported into the bonded warehouse without immediate payment of the applicable customs duties.

Customs duty and IGST on imported capital goods are deferred until their clearance for home consumption. If capital goods are exported at the end of their life cycle, duties can be completely avoided/waived off.

2. Import of raw materials and components

Eligible raw materials and components can be imported into the bonded warehouse without immediate payment of the applicable customs duties.

When finished goods manufactured using these inputs are cleared into the domestic market, the applicable duty on the imported inputs is generally payable proportionately.

Customs duty on imported raw materials used in manufacturing is deferred until clearance of finished goods. If finished goods are exported, the deferred duty is fully waived.

Key benefits of MOOWR

• Duty deferment on capital goods and inputs: Reduces immediate customs duty outflows on eligible imports.

• Improved cash flow: Allows businesses to deploy funds towards manufacturing, operations and expansion instead of paying customs duties upfront.

• No interest merely on duty deferment: No interest is ordinarily payable simply because customs duty remains deferred while goods are warehoused in compliance with the law.

• Savings on financing costs: Can reduce the need for working capital borrowings to fund upfront customs duty payments.

• No general export obligation: The core MOOWR framework does not impose a general export obligation merely to avail the scheme's warehousing benefits.

• Domestic and export market flexibility: Businesses can manufacture for both markets, subject to applicable customs requirements.

• Warehouse-to-warehouse transfers: Eligible warehoused goods can be transferred between bonded warehouses under the prescribed procedures.

• Long-term operational flexibility: The scheme supports manufacturing operations without a general fixed maximum warehousing period.

Who should consider MOOWR?

MOOWR may be relevant for:

• Manufacturers importing expensive production machinery.

• Companies establishing new manufacturing facilities in India.

• Businesses importing substantial quantities of raw materials and components.

• Manufacturers catering to both domestic and export markets.

• Businesses seeking to improve working capital management without taking on a scheme-specific export obligation.

MOOWR is particularly worth evaluating where customs duty on imported machinery and inputs represents a significant upfront financial burden.

B. IGCR Scheme – Import of Goods at Concessional Rate of Duty

The Import of Goods at Concessional Rate of Duty (IGCR) framework enables eligible importers to claim a concessional customs duty rate on specified imported goods when those goods are used for the prescribed purpose or end use.

The framework is governed by the applicable customs rules and exemption notifications.

Unlike EPCG and Advance Authorisation, IGCR is not an export-promotion scheme. Its primary purpose is to provide concessional customs duty treatment for goods covered by the relevant notification and used in accordance with its conditions.

How does IGCR work?

An importer must first determine whether the imported goods and their intended end use are covered by an applicable customs exemption notification.

Where eligible, the importer must comply with the prescribed registration or intimation procedures, record-keeping requirements, end-use conditions and reporting obligations.

The benefit is not automatically available for every type of machinery, capital good or raw material. Eligibility depends on the specific notification and the conditions attached to it.

The applicable exemption may cover only specified customs duty components. IGST treatment must be checked separately under the relevant notification; businesses should not assume that both BCD and IGST are exempt.

Key benefits of IGCR

• Concessional customs duty: Eligible goods may be imported at a lower rate of duty than the otherwise applicable rate.

• No general export obligation: The framework does not impose a general export obligation merely because the importer claims the IGCR benefit.

• Support for specified manufacturing activities: Businesses can reduce the cost of eligible goods used for notified purposes.

• Potential capital cost savings: Where the applicable notification permits, qualifying capital goods may benefit from concessional duty treatment.

• Permitted job work arrangements: Job work may be possible, subject to the applicable rules, notification conditions and prescribed procedures.

• Controlled end-use compliance: Businesses can avail the specified concession by meeting the prescribed conditions and maintaining the required records.

• Depreciation Benefit: Depreciation is available under IGCR, allowing duty to be paid on the lower value of capital goods after depreciation, instead of their original value, where applicable.

Who should consider IGCR?

IGCR may be relevant for:

• Manufacturers importing goods specifically covered by a concessional-duty notification.

• Businesses importing eligible machinery or components for a prescribed end use.

• Companies seeking concessional customs duty treatment without a general export obligation.

• Importers whose proposed goods and operations satisfy the relevant notification conditions.

The key requirement is to verify the precise notification coverage, applicable duty benefit and end-use conditions before importing the goods.

3. Comparison: Which Scheme Offers What?

Parameter	EPCG	Advance Authorisation	MOOWR	IGCR
Primary purpose	Import of eligible capital goods for export promotion	Import of eligible inputs for export production	Bonded manufacturing and customs duty deferment	Concessional duty on goods for specified purposes
Typical imports	Capital goods and eligible equipment	Raw materials, components and other eligible inputs	Capital goods, raw materials and components	Goods covered by the applicable notification
Nature of benefit	Exemption from Basic Customs Duty (BCD), IGST and cess.	Exemption from Basic Customs Duty (BCD), IGST and cess.	Duty deferment (BCD +IGST ), No exemption.	Concessional duty (only BCD) as specified in the relevant notification
Export obligation	Yes	Yes	No export obligation	No export obligation under the framework
Domestic market sales	Subject to scheme and authorisation conditions	Subject to authorised use and applicable conditions	Permitted, subject to applicable duty and clearance requirements	Subject to prescribed end-use and notification conditions
Bonded warehouse required	No	No	Yes	No
Main advantage	Lower cost of eligible capital goods	Lower cost of eligible inputs for export production	Improved working capital through duty deferment	Lower customs duty on eligible notified imports
Key compliance	Export obligation and authorisation conditions	Input-output norms, export obligation and other conditions	Warehouse licensing, inventory records and operational compliance	End-use conditions, records and prescribed reporting

4. Can the Schemes Be Used Together?

Yes, businesses can use more than one scheme together, provided they meet the conditions of each scheme. For example, a business may use MOOWR for manufacturing operations, Advance Authorisation for importing inputs used in export products, EPCG for importing eligible capital goods, and IGCR for importing goods at concessional duty for specified purposes.

However, the same goods or duty benefit cannot be claimed under multiple schemes unless specifically permitted under the applicable provisions. Read our blog to learn more about using MOOWR along with EPCG and IGCR. (https://www.consultancycounsel.com/post/moowr-scheme-igcr-benefits-together) (https://www.consultancycounsel.com/post/epcg-and-moowr-benefits)

Conclusion

EPCG, Advance Authorisation, MOOWR and IGCR provide different ways for eligible businesses to manage customs duty costs in India.

The right scheme is not necessarily the one offering the highest duty saving. It is the one that provides the best overall commercial outcome while remaining consistent with the business's import requirements, manufacturing model, export plans and compliance capabilities.

Planning to import machinery, capital goods or raw materials into India?

Commercial Consultancy Counsel (CCC) can help your business evaluate the applicable customs duty benefit schemes, assess eligibility, compare potential benefits and understand the compliance requirements relevant to your proposed imports.

Contact CCC to determine which customs duty benefit scheme may be best suited to your business.