MOOWR – A backdrop
The Government of India with a view of 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 the private bonded warehouse from customs station without payment of duties and use it in manufacture of finished goods. The scheme aims to give an impetus to government’s “Make in India” initiative by extending various benefits which are listed in ensuing paragraphs.
MOOWR – Salient Features
The highlights/ key features of the scheme are as below:
There is no minimum area requirement or geographical limitation on where such units can be set up.
Remission of import duties if finished goods are exported and where finished goods are cleared for home consumption there is deferral of payment of import duty without any interest liability.
The scheme allows procurement of GST compliant goods from the domestic market for use in manufacture and other operations in the warehouse.
A single digital account for ease of doing business and easy compliance.
The duty on the capital goods is to be paid only when the same is cleared for domestic consumption. If the capital goods are exported or destroyed then they do not attract any import duties.
There is no investment threshold or export obligation under the scheme, nor is there is any net foreign exchange earning obligation.
The scheme allows even an existing warehouse to be converted into a private bonded warehouse and thereby making entry into the scheme easy and flexible.
Sending/ receiving goods for job work are permitted without payment of duty.
The scheme allows for procurement of GST paid goods from the domestic market for use in manufacture and other operations.
The responsibility to oversee the operations of the unit under the scheme has been shifted from proper office (applicable to other export-oriented schemes) to a self-appointed statutory warehouse keeper.
MOOWR - How does it stand against other schemes?
Basis | EOU | Advance Authorization | SEZ | MOOWR |
Exports | 100% of production to be exported except permissible sales in DTA | Imported inputs are to be physically incorporated into the export product | No such restrictions | No such restrictions |
Minimum investment | 1 crore in plant and machinery except in the case of certain production areas | No such restrictions | Minimum investment in the projects and minimum networth of applicant as prescribed | No such restrictions |
Time to construct the facilities | Minimum of 2 years with a maximum extension of 1 year to construct plant and machinery to start the operations | No such restrictions | The operations are to commence within a period of 1 year, with a maximum extension of 3 years | No such restrictions. Even existing warehouse can be converted |
Obligations | Has net foreign exchange (‘NFE’) earnings as a percentage of exports and export performance obligations | There should be a minimum value addition for the purpose of fulfilment of export obligation. | The unit has to earn a positive NFE during it’s five years or is subject to penalties | No such obligations |
Validity | Initially 5 years, extensible to another 5 years subsequently | Advance authorisation is valid for a period of 12 months from the date of the issue of such authorisation | Valid for a period of 5 years from the date of commencement of production or services and can be extended by a further period of 5 years | No such restrictions |
Compliance | Not entirely digital, involves lengthy process and NFE calculations | Not entirely digital, involves lengthy process and NFE calculations | Not entirely digital requires visit to DGFT office | Single digital account for ease of business and compliance |
RoDTEP | Rebate under RoDTEP can be applied | Rebate under RoDTEP can be applied | Rebate under RoDTEP can be applied | Not eligible for RoDTEP |
Depreciation on capital goods | Can be claimed after clearing the same for home consumption | Can be claimed | Can be claimed | Cannot be claimed |
While above table outlays the benefits which MOOWR has over other schemes, these by itself would not suffice to conclude the scheme one should opt over the other since as with any scheme there are certain benefits which elude this scheme, some which are outlined below – these benefits are available to EOU/SEZ units.
Excise duty and CST exemption/refund on procurement of fuel from DTA
Service export units are not allowed
Prohibited goods are not allowed to be exported under the scheme.
DTA supplier can avail duty drawback or AA on supplies to EOU. Since duty drawback is available to supplier of EOU unit, exports are free of taxes however there is no refund of taxes in domestic inputs to MOOWR unit effectively meaning that MOOWR scheme may not be advisable for imports where domestic raw material consumption is high compared to imported materials.
It is pertinent that one should analyse the benefits offered by these scheme in light of their fact pattern vis-à-vis the applicable scheme including cost benefit analysis since as they say the devil lies in the details.
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