moowr: MOOWR– New warehouse system can play key role in India’s trade

The government, as part of an initiative to encourage local manufacturing, revamped the previous system of Manufacturing & Other Operation in Warehouse Regulation (MOOWR), which was first introduced in 1966 as part of customs law. The MOOWR authorized the owner of the stored goods to continue manufacturing processes or other operations in such a warehouse, subject to specific conditions. The said regime was given new impetus by liberalizing some key compliance requirements in the revised MOWR, 2019, notified on October 1, 2019 to align with the government’s “Atmanirbhar Bharat” plan.

The revised program has caught the attention of many companies in India, which 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 raw materials or capital goods are imported, the import duty on them is deferred. If these imported inputs are used for exports, the deferred duty is also exempt. It is only when the finished products are cleared into the domestic market that import duties must be paid on the imported raw materials used in production. Import duties on capital goods must be paid when such capital goods are cleared in the domestic market.

Main features of MOWWR, 2019

  • Deferred import duty on raw materials: Until customs clearance of finished products, import duties for raw materials used in manufacturing or other operations are deferred. It will be deleted in the event of export of finished products.
  • Deferred duties on capital goods: Until a bonded facility is cleared, duties on capital goods used in manufacturing or other operations are deferred and can be avoided if exported.
  • Transparent transfer between warehouses: A license holder must transfer goods in storage from one bonded facility to another without payment of duty. The obligation to pay deferred duty is also transferred to the owner of the new facility with the transfer of the goods.
  • No export obligation: An entity can sell 100% of the goods produced in the bonded warehouse in the domestic market. However, the obligation to pay duties on imported inputs would follow.
  • Appointment of the storekeeper: The responsibility of the responsible officer to supervise the operations of a warehouse has been transferred to a self-appointed warehouse keeper.

Eligibility & Procedure to obtain a license under MOWWR, 2019

Under the new MOOWR, the following people can apply and operate under these regulations:

  • A person who has obtained a license for a warehouse under section 58 of the Customs Act, in accordance with the Private Warehouse Licensing Regulations, 2016.
  • A person applying for a license for a warehouse under section 58 of the Customs Act, as well as permission to undertake manufacturing activities or other operations in the warehouse under section 65 of this law.

An application must be submitted to the Chief Commissioner of Customs or the Commissioner of Customs together with an undertaking:

  • Maintain digital goods receipt and pickup accounts and digitally provide them to surety agent on a monthly basis
  • Inform input-output standards or any revisions to standards whenever deemed necessary
  • To perform an obligation in the specified format

Key Operational Benefits and Plan Flexibility:

  • Simple and hassle-free online application process via a common application approval form.
  • The Senior Customs Commissioner or the Customs Commissioner acts as the single point of contact for all approvals.
  • Simplified digital recording and monthly archiving of the receipt, storage, operations and removal of goods in the warehouse.
  • A new manufacturing plant can be set up or the existing unit can be converted to a bonded warehouse, regardless of its location in India.
  • Unlimited storage period for the storage of equipment or other goods until their release for consumption, without any interest.
  • No physical control by customs authorities.

Some key issues awaiting clarification are the eligibility for depreciation of used capital goods, the relocation of EOU / SEZ under the scheme, and some procedural relaxations in terms of compliance with related laws. While the program appears industry-friendly, clarity on these aspects can make the program more agile and provide certainty for industry and investors.

(
The author is Partner – Customs & International Trade, Indirect Tax at BDO India)

(The one-stop destination for MSMEs, ET RISE provides news, insights and analysis on GST, exports, financing, policies and management of small businesses.)

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About Leah Albert

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