Customs Duty & GST Implications under the MOOWR Scheme

Why Duty Deferment Matters — A Real Story

Last year, a mid-sized electronics manufacturer in Noida was running out of cash faster than it was earning it. Every shipment of imported components meant paying customs duty and IGST upfront — long before sales began. That changed when the company registered under the MOOWR scheme.

By converting its warehouse into a bonded facility, it could import raw materials and machinery without immediate tax payment. Duties became payable only when the goods were sold in the domestic market. Overnight, their working capital turned from a bottleneck into a growth lever.

That’s the power of MOOWR — a duty deferment system designed to boost manufacturing competitiveness in India.

What Exactly is the MOOWR Scheme?

MOOWR stands for Manufacture and Other Operations in Warehouse Regulations. It allows Indian manufacturers and importers to store goods in a bonded warehouse and carry out manufacturing or other operations — without paying customs duty or IGST upfront.

Here’s how it works in simple terms:

• You import raw materials, parts, or capital goods into your own bonded premises.
• You can start production immediately without paying any duty at the time of import.
• You pay customs duty and IGST only when goods are cleared for sale in the domestic market (DTA).
• If you export the finished goods, you don’t pay any import duties at all.

In essence, MOOWR helps you delay tax outflow until you actually generate revenue.

Customs Duty under MOOWR — The Timing Advantage

Unlike traditional exemption schemes, MOOWR doesn’t waive customs duty — it defers it. The duty becomes payable only when:

1. Goods are cleared for home consumption (DTA sale),
2. Capital goods are removed from the bonded premises, or
3. The goods are improperly accounted for or removed.

This timing difference gives manufacturers an enormous cash-flow advantage. You can focus on production and sales first, and handle customs payments later — when your revenue cycle supports it.

GST Implications under MOOWR

GST, particularly IGST on imports, is also deferred under MOOWR. That means no IGST is payable when you import goods into your bonded warehouse. It becomes due only when you clear goods for sale in the Indian market.

Think of it as a “pause button” on taxes.

• Exports: IGST on inputs is not triggered when the finished goods are exported.
• Domestic sales: IGST and customs duties are payable at the time of DTA clearance.
• Input Tax Credit (ITC): You can claim ITC once IGST has actually been paid at clearance.

This flexibility is a huge relief for manufacturers dealing with tight cash cycles or long production timelines.

MOOWR vs SEZ vs EOU — How They Differ

Many businesses wonder whether MOOWR is better than SEZ or EOU. The truth is, each has a different purpose. Here’s a quick comparison:

Feature	MOOWR	SEZ	EOU
Import duties	Deferred until DTA clearance	Fully exempt	Concessional
Location	Anywhere in India	Only in SEZ zones	Anywhere (with approval)
Export obligation	None	Mandatory	Conditional
License validity	Perpetual	Linked to zone	Periodic renewal
Administrative control	Customs (Bonded Warehouse)	SEZ Authority	Customs / DGFT

In short:

• Choose SEZ if you are export-heavy and can relocate inside a zone.
• Choose MOOWR if you sell in both domestic and export markets and want location flexibility.

When Does Duty Become Payable under MOOWR?

There are three key scenarios when deferred duties become due:

1. When finished goods are cleared for sale in India.
2. When capital goods are moved out of the bonded premises.
3. When goods are not properly accounted for or are removed without approval.

To stay compliant, businesses must maintain detailed records — including import logs, stock registers, and clearance data. Customs authorities conduct audits to verify that no goods are cleared into DTA without duty payment.

 

Why Duty Deferment Matters for CFOs

India’s manufacturing competitiveness depends heavily on how efficiently companies manage their costs. With logistics and compliance expenses adding up, delaying customs and GST payments until actual sales gives businesses more room to invest in operations, machinery, and inventory.

For mid-sized manufacturers, this can mean saving 20–25% of working capital otherwise locked in taxes.

Risks and Penalties — What to Avoid

While MOOWR offers tremendous flexibility, it also demands strict compliance. Here’s what businesses must be careful about:

• Treating deferment as exemption: Duties will become payable later — never forget that.
• Weak inventory tracking: Any mismatch in stock records can trigger duty recovery, interest, and penalties.
• Capital goods movement: Moving machinery to DTA without pre-calculated duty can attract penalties.
• Late audit submissions: Customs can impose fines up to ₹4 lakh for non-compliance with warehousing provisions.

The takeaway: MOOWR rewards precision. Businesses with clear SOPs, accurate data, and transparent reporting benefit the most.

Compliance Structure — Setting Up Right

To operate under MOOWR successfully, companies should:

1. Designate a bond officer internally to handle customs documentation.
2. Maintain electronic stock registers with real-time updates.
3. Establish a maker-checker process for all clearances.
4. Conduct quarterly internal audits to match records with customs filings.
5. Integrate MOOWR data with ERP or accounting systems.

These steps not only ensure compliance but also reduce the risk of disputes during customs audits.

MOOWR and Other Schemes — Can They Coexist?

Yes — but with caution. Businesses sometimes combine MOOWR with IGCR or EPCG benefits. However, one must avoid overlapping benefits or double exemptions. Always verify with the latest customs notifications and, if needed, seek an advance ruling to stay on the safe side.

Key Benefits at a Glance

• No export obligation — freedom to sell domestically or abroad.
• Deferred BCD and IGST — improved working capital.
• Simpler setup — anywhere in India, not restricted to SEZ zones.
• Perpetual license — no renewal hassles.
• Audit-ready transparency — fewer disputes and faster clearances.

Conclusion — The Smart Way to Save

MOOWR is one of the most underutilized incentives for Indian manufacturers. It lets you control when you pay taxes, without compromising on compliance. Businesses that adopt it early benefit from better liquidity, faster scaling, and stronger financial agility.

However, the scheme demands discipline — every transaction must be properly tracked, recorded, and reported. Done right, MOOWR can reduce cost burdens, improve cash flow, and give your business a decisive edge in the market.

📞 +91 78350 06182 | 📧 wecare@greenpermits.in
Book a Consultation with Green Permits