MOOWR Scheme: Maximizing The Impact of Import Operations for Manufacturers
- Commercial Consultancy Counsel
- Jan 25, 2024
- 6 min read
Updated: Nov 28, 2024
In the dynamic landscape of global trade, navigating regulatory frameworks while maximizing operational efficiencies is paramount for businesses and especially for manufacturers.
Amidst this backdrop, the Manufacture and Other Operations in Warehouse Regulations (MOOWR) Scheme emerges as a beacon of opportunity for manufacturers.
Designed to streamline import processes and foster seamless operations, this scheme presents a compelling avenue for manufacturers to thrive in the competitive marketplace.
In this blog, we will have a closer look at the MOOWR scheme and understand various factors surrounding it, ranging from the eligibility to obtain a license under this scheme to covering various advantages that this scheme provides.
We at Commercial Consultancy Counsel are committed to guiding your business to get the most out of the perks that the MOOWR scheme has to offer.
What is the MOOWR Scheme?
What is a Private Bonded Warehouse?
Is Manufacturing and Other Operations allowed in Public Bonded Warehouse?
What is the eligibility to obtain a licence under MOOWR?
Is It Mandatory to Appoint a Warehouse Keeper in the Factory Licensed under Section 58 of the Customs Act?
What are the key highlights and advantages of the MOOWR Scheme?
What is The Recent Amendment in the Customs Act, 1962 and What are its Implications?
We start our exploration by first understanding what the MOOWR Scheme actually is in the next section.
1. What is the MOOWR Scheme?
The Manufacture and Other Operations in Warehouse Regulations (MOOWR) Scheme, is a scheme where manufacturers are allowed to import raw materials and capital goods without the payment for Basic Customs Duty (BCD) and Integrated Goods and Service Tax (IGST).
The goods can also be procured domestically with the payment of GST.
If the final product manufactured in a Private Bonded Warehouse (also known as Warehoused Goods) is exported, then the BCD and IGST is waived on the export of the Warehoused Goods.
If the Warehoused Goods are cleared domestically then the BCD and IGST are to be paid
Waste produced while manufacturing the Warehoused goods will be subjected to Duty (only in case raw materials are imported).
How do private bonded warehouses play a significant role in the MOOWR Scheme?
Let’s understand their role in more detail in the next section.
2. What is a Private Bonded Warehouse?
A private bonded warehouse is a facility owned and operated by a private entity, designed for the secure storage of goods/raw materials that have been imported.
The primary function of a private bonded warehouse is to house these goods temporarily, providing a controlled environment until they are ready for sale or distribution within the host country or other countries.
This type of warehouse plays a crucial role in international trade by allowing businesses to defer the payment of customs duties and taxes until the Warehoused Goods are officially released for sale or export.
Let Commercial Consultancy Counsel help you demystify the complexities of private bonded warehouses for you.
But what if you decided to use a Public Bonded Warehouse? Is it subject to any regulations to the Customs Act of 1962?
Let’s find out in the next section.
3. Is Manufacturing and Other Operations in a Bonded Warehouse allowed in Public Bonded Warehouse Licensed under Section 57 of the Customs Act?
Manufacture and other operations in a bonded warehouse is allowed only in a private bonded warehouse licensed under Section 58 of the Customs Act 1962.
Now that you understand the importance of the MOOWR Scheme and the role Private Bonded Warehouses play in it, we come to the first step of taking advantage of the benefits this scheme offers.
That is, applying for a license after meeting its eligibility criteria.
We cover these eligibility criteria for obtaining a license under the MOOWR scheme in the coming section.
4 What is the eligibility to obtain a licence under MOOWR?
The following persons are eligible to apply under the MOOWR Scheme:
(i) A person who has been granted a licence for a private warehouse under Section 58 of the Customs Act, 1962 in accordance with Private Warehouse Licensing Regulations, 2016.
(ii) A person can also make a combined application for licence for a warehouse under Section 58, along with permission for undertaking manufacturing or other operations in the warehouse under Section 65 of the Act.
Additionally, the above persons mentioned have to be a citizen of India or an entity incorporated or registered in India.
Section 58 of the Customs Act has many more such regulations that can directly affect your business.
Our team of Customs Consultants are here to make things easy for you.
Out of all the regulations in the Customs Act, there are certain rules regarding warehouse keepers to maintain a factory licensed under Section 58.
Let’s have a look at these regulations in the next section.
5. Is It Mandatory to Appoint a Warehouse Keeper in the Factory Licensed under Section 58 of the Customs Act?
In order for a unit to be licensed as a private warehouse under Section 58 of the Customs Act, the appointment of a warehouse keeper is mandatory.
The warehouse keeper assumes a pivotal role, of being entrusted with a range of duties and responsibilities essential for the smooth operation of the warehouse.
This includes not only the maintenance of accounts but also the authority to sign pertinent documents on behalf of the licensee.
Now comes the most important part of the MOOWR Scheme, particularly beneficial for businesses.
In other words, the advantages this scheme provides to businesses and how it streamlines their import manufacturing operations.
Let’s dive deeper into the perks of this scheme in the next section.
6. What are the key highlights and advantages of the MOOWR Scheme?
The following are the key highlights and advantages of the MOOOWR Scheme:
A Private bonded warehouse/manufacturing unit can import goods (both inputs and capital goods) under customs duty deferment with no interest liability
There is no investment threshold or export obligation unlike other Foreign Trade Policy Schemes
The duties are fully remitted if the Warehoused Goods resulting from such operations are exported
Import duty is payable only if the resulting goods or imported goods are cleared in the domestic market
No geographical limitation on where such units can be set up.
Single application for permission/licence to operate warehouse under Section 58 and 65 of the Customs Act 1962.
Any existing business or new facility can be converted to a bonded premise with no specific eligibility criteria (product, investment threshold)
License once obtained is valid for permanence unless cancelled. No hassles of periodic renewals.
There is no requirement of maintaining a positive NFE (Net Foreign Exchange Earnings)
Goods can be transferred from one bonded warehouse to another without payment of duty
The unit is subject to audit by proper officer under Customs in accordance with the provisions of the law
Unit is allowed to carry trading of goods, provided goods are moved within 90 days of import. Beyond 90 days and till a year, interest will be charged on the duty deferred.
Monthly return of the receipt, storage, operations and removal of the goods in the warehouse
Our team of experts are here to help your business make the best utilization of the MOOWR Scheme.
Recently, there has been an amendment in the Customs Act of 1962 which has a direct impact on various import-export schemes, including the MOOWR Scheme.
We look at the key highlights of this amendment in the next section.
7. What is The Recent Amendment in the Customs Act, 1962 and What are its Implications?
The Finance Act of 2023 has brought about significant modifications to the Customs Act, 1962 particularly through amendments to Section 65(1) of the Customs Act and the introduction of a new provision, Section 65A into the Customs Act.
These amendments outline that duties such as the IGST and Compensation Cess must be paid on goods stored in a warehouse for manufacturing and other operations, from a date that will be notified by the government.
However, it is important to note that basic customs duty and other duties will remain exempted for goods already stored in a warehouse.
This amendment will be a major setback for manufacturers under the MOOWR Scheme since they are now obligated to make upfront payments for IGST and Cess, and the tangible benefits derived will be confined to the exemption on BCD.
The shift towards requiring upfront payment for specific duties may impact the cash flow and operational efficiency of these manufacturers, potentially influencing strategic decisions related to warehouse usage and production processes.
Conclusion
As the winds of change sweep through the overall Import-Export landscape, the MOOWR Scheme stands as a testament to innovation and adaptability in the realm of international trade and manufacturing.
While recent amendments pose challenges, the essence of the scheme remains rooted in its ability to empower businesses, drive economic growth, and foster a climate of competitiveness on the global stage.
Embracing the MOOWR Scheme not only unlocks tangible benefits but also signifies a commitment to embracing change and leveraging opportunities in an ever-evolving marketplace.
In conclusion, the MOOWR Scheme symbolizes a strategic gateway for businesses to seize the reins of opportunity and navigate the complexities of global trade with confidence and resilience.
With our years of experience in avenues ranging from DGFT Consultancy to Certification Assistance for various Import-Export authorizations, we are dedicated to making your journey of exploring the MOOWR Scheme as smooth as possible.
Let us show you how.
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