MOOWR : Manufacture and other Operations in Warehouse : A Constructive Upkeep for Indian Manufacturers
Prelude:
As the current Exports Incentive schemes Published in India’s Foreign Trade policy are being challenged in WTO by various countries for providing Exports Incentives which is against the Article 3.1of the WTO subsidies and countervailing agreement moreover, the Incentive rates are getting reduced every year and procedure complexities are more in claiming the same at the right time which affects the working capital. In this background, Indian Manufactures should look into other scheme options like MOOWR, 2019 where Customs Duty deferment On Import of Capital Goods and raw materials /Packing Materials which is WTO Compliant
Section 65 of the Customs Act, 1962 (‘the Act’) provides that the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods with the permission of the Principal Commissioner of Customs or Commissioner of Customs (specified officers) and subject to the prescribed conditions.
In supersession of MOOWR, 1966, the Central Board of Indirect Taxes and Customs (CBIC) notified Manufacture and Other Operations in Warehouse Regulations, 2019 on 19 June 2019.
Scheme Overview – Manufacturing and processing in a bonded facility
With the Government’s continuous efforts to promote India as the manufacturing hub globally and the commitment toward ease of doing business, another initiative in this direction by the Central Board of Indirect Taxes (CBIC) is allowing the import of raw materials and capital goods without payment of duty for manufacturing and other operations in a bonded manufacturing facility.
When the raw materials or capital goods are imported, the import duty on them is deferred. If these imported inputs are utilised for exports, the deferred duty is exempted. Only when the finished goods are cleared to the domestic market, import duty is to be paid on the imported raw materials used in the production. Import duty on capital goods is to be paid if and when the capital goods are cleared to the domestic market.
Business Benefits:
- Duty deferment ( without Interest) in case of import of capital goods and raw materials
- No customs duty if the goods are exported from the warehouse
- No export obligation or Positive NFE requirements
- SION norms are to be adopted on a self-certification basis
- Interest-free storage period till the time the goods could be utilized in manufacturing
- Capital Goods / Inputs can be sourced from SEZ/FTWZ
Compliance Requirements:
- Single digital accounting
- Risk-based Audits
- Licensees manufacturing or carrying out other operations in a bonded warehouse shall be required to maintain records as per the form prescribed under circular No 34/2019 of CBIC (Annexure B). Regulation 4 of the MOOWR, 2019,
- Owner of the warehoused goods to execute a triple duty bond for the warehoused goods. Thus, the bond prescribed under the Circular as per Annexure C serves the requirements of both MOOWR, 2019 and Section 59 of the Customs Act.
Grey Areas
- Rules are not clear for the JOB work scenario where Goods are taken out from Bonded warehouse
- Continuation of benefits under current FTP for Goods Exported from Bonded warehouse. Expecting more clarity in the upcoming FTP to be published by Sep 2021
- Quantum of wastage allowed, Value addition, etc
- Direct tax benefits – Income tax Holiday etc
- The benefit of Duty deferment in case of conversion of EOU to Bonded warehouse
- Incidence and Calculation of duty Repayment for Capital Goods
- Duty Repayment in Re-Import Scenario
- Management of Goods Moved for repair/Testing
- Admissibility of AIR DBK if the Raw materials are Imported under the MOOWR scheme
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