Capital goods imported under the MOOWR scheme.(Part 1 of 2)

[YAGAY andSUN]

Capital goods imported under the MOOWR scheme (Manufacture and Other Operations in Warehouse Regulations, 2019) are governed by a special set of regulations notified under the Customs Act, 1962. This scheme allows manufacturers to import capital goods and raw materials without payment of customs duty, provided the goods are used for manufacturing and other operations in a bonded warehouse.

Here’s a concise explanation of how capital goods are treated under the MOOWR scheme:

Key Features of Capital Goods under MOOWR Scheme

Duty Deferment:

No upfront payment of Basic Customs Duty (BCD), IGST, Social Welfare Surcharge, or other applicable duties at the time of import.

Duties are deferred and only become payable when the goods (or finished goods made from them) are cleared for home consumption (i.e., into the domestic market).

Use within Bonded Premises:

The capital goods must be installed and used within the bonded manufacturing premises.

There is no time limit for their usage in the bonded warehouse.

No IGST on Import:

Since the import takes place under bond, IGST is not levied on capital goods at the time of import, which helps ease working capital burden.

No Physical Export Obligation:

Unlike EPCG or other export-linked schemes, MOOWR does not impose any mandatory export obligation.

Goods can be cleared for DTA (Domestic Tariff Area) by paying deferred duties.

Clearance of Capital Goods:

If capital goods are cleared to DTA, applicable duties must be paid on depreciated value.

If capital goods are exported, no duty is payable at all.

Compliance Requirements

Manufacturer must obtain a MOOWR license and execute a bond.

Maintain prescribed inventory and operational records.

File monthly returns (Form A) detailing movement and usage of goods.

To avail the benefits under the MOOWR (Manufacture and Other Operations in Warehouse Regulations) Scheme, you must file an application with the Customs Department. The process involves several steps to ensure that your manufacturing operations are compliant with the conditions set under the scheme. Here's how to file the application:

Steps to File an Application for MOOWR Scheme Benefits:

1. Eligibility Check

Before proceeding, ensure that you meet the eligibility criteria for the MOOWR Scheme, which includes:

• The applicant is a manufacturer.
• The goods being imported are intended for use in manufacturing or operations in a bonded warehouse.
• The goods will not be used for retail sale but will be used in the manufacture of goods for export or clearance into the domestic market.

2. Obtain Necessary Documents

Gather all the required documents for filing your application:

• IEC (Import Export Code) certificate.
• GST Registration details.
• Corporate Registration Documents (e.g., Company’s Articles of Incorporation, Memorandum of Association, etc.).
• Details of your bonded warehouse (address, registration with Customs).
• Description of the capital goods or raw materials you intend to import under the scheme.
• Proof of the manufacturing activity you carry out or intend to carry out within the bonded warehouse.

3. Filing the Application with Customs

The application is made electronically through the Customs Department's ICEGATE Portal. You can follow these steps:

• Log into ICEGATE Portal: Visit the ICEGATE website (www.icegate.gov.in), which is the portal for Customs clearance.
• Register or Login: If you haven't already registered, create an account on the portal. If you are already registered, log in using your credentials.
• Apply for MOOWR Authorization: Once logged in, locate the section for “Bonded Warehouse” or “Manufacture and Other Operations in Warehouse Regulations (MOOWR)”. You will need to fill in the online form for seeking approval under the MOOWR scheme.
• Details of Application: In the form, you will need to provide details about:
  • The type of manufacturing activity.
  • The location of the warehouse.
  • The HSN codes of the goods being imported.
  • Projected volume and value of goods to be imported.
  • Details of the bond (a financial security provided to Customs to ensure compliance).
• Sign the Application: Submit the application after ensuring all the details are correctly filled in. You may be required to digitally sign the application using a Digital Signature Certificate (DSC).

4. Customs Review and Approval

After submission, Customs will review the application and may conduct a physical inspection of your premises (bonded warehouse). They will check the following:

• Whether your warehouse is suitable for operating under the MOOWR scheme.
• Verification of your manufacturing activities and compliance with regulatory standards.
• Assessment of financial security (bond) to ensure that customs duties will be paid when required.

5. Issuance of Authorization

If your application is approved, Customs will issue a MOOWR Authorization, which allows you to import goods under the scheme. You will be granted the ability to import capital goods and raw materials into your bonded warehouse without paying customs duties upfront.

6. Post-Approval Compliance

After receiving the authorization:

• Maintain records: Keep detailed records of all goods imported under MOOWR, their usage in manufacturing, and their eventual movement (whether cleared for export or DTA consumption).
• File Monthly Returns: You are required to file monthly returns (Form A) with the Customs authorities, detailing the usage of imported goods in manufacturing activities and their movement.

Additional Considerations

• Bank Guarantee/Bond: You will be required to provide a bank guarantee or security bond to ensure compliance with the scheme.
• Duty Payment: If the goods are cleared for domestic consumption (DTA), you will need to pay applicable duties at that point, but the import duties are deferred.
• Refund for Exports: If the goods are exported, you can claim a refund of the duties paid.

Conclusion

Capital goods imported under the MOOWR scheme enjoy duty deferment, no IGST payment at import, no export obligation, and flexibility in usage within bonded premises. Duty is only paid when such goods or their output are cleared into the domestic market. This makes MOOWR highly beneficial for capital-intensive industries looking to optimise cash flow without being tied to export commitments.

Filing an application under the MOOWR Scheme requires compliance with the Customs regulations, including proper documentation, submitting an application via the ICEGATE portal, and ensuring your manufacturing operations align with the scheme's requirements. Once approved, you can import goods into your bonded warehouse without paying customs duties upfront, thus improving cash flow and operational efficiency.