What Is the MOOWR Bonded Manufacturing Scheme?
The Manufacture and Other Operations in Warehouse (MOOWR) Scheme lets a business import inputs and capital goods into a licensed customs bonded warehouse without paying customs duty upfront, manufacture or process goods inside that warehouse, and pay duty only if and when the resulting goods are cleared into the domestic market. If the finished goods are exported instead, the duty on the imported inputs is never paid at all. There is no interest charge on the deferred duty, no minimum investment, no export obligation, and no restriction on where in India the unit can be set up.
MOOWR is not a new law — it is a procedural scheme built on a single section of India's customs code. For a foreign company setting up manufacturing in India, it converts customs duty from an upfront cash cost at the port into a cost that is payable, if at all, only when goods actually leave the warehouse for the Indian market.
Legal Basis
- Section 65 of the Customs Act, 1962 — Gives the Principal Commissioner or Commissioner of Customs the power to permit manufacture or other operations in relation to goods in a bonded warehouse, subject to conditions. Section 65(2)(a) allows duty-free clearance of the resultant product on export, subject to a proviso on waste or refuse; section 65(2)(b) taxes waste or refuse cleared for home consumption.
- Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 — Notified under Notification No. 69/2019-Customs (N.T.) dated 1 October 2019, issued in exercise of powers under sections 157 and 143AA read with section 65 of the Customs Act. This is the current MOOWR regulation; it superseded the original Manufacture and Other Operations in Warehouse Regulations, 2019 issued three months earlier under Notification No. 44/2019-Customs (N.T.) dated 19 June 2019.
- Circular No. 34/2019-Customs, dated 1 October 2019 — CBIC's operating procedure for MOOWR units, covering the application form, bond format, accounting records, and the GST treatment of goods cleared to the domestic market. It consolidates and replaces the earlier Circular No. 38/2018-Customs.
- Section 58 of the Customs Act, 1962, and the Private Warehouse Licensing Regulations, 2016 — MOOWR permission is granted only on top of a private bonded warehouse licence; a unit cannot operate under MOOWR without also holding, or simultaneously applying for, a Section 58 licence.
How MOOWR Works
Who Can Apply
Two categories of applicant are eligible: a person who already holds a private bonded warehouse licence under Section 58 of the Customs Act, or a person who applies for a Section 58 licence and Section 65 permission together in one combined application. The applicant must be a citizen of India or an entity incorporated or registered in India — so a foreign company operating in India applies through its Indian subsidiary or registered branch, not directly in its own name. Only private bonded warehouses qualify; manufacturing is not permitted in a public bonded warehouse licensed under Section 58's counterpart, Section 57.
Eligibility does not depend on whether the finished goods will be exported or sold in India. An existing domestic factory that has never exported anything can apply, and a brand-new unit built purely to sell into the Indian market can apply too — the only requirement is that some of its inputs or capital goods are imported and warehoused under Section 65.
The Single Application
The applicant files one combined application-cum-approval form with the jurisdictional Principal Commissioner or Commissioner of Customs, integrating the Section 58 warehouse licence application with the Section 65 manufacturing permission. Alongside the form, the applicant undertakes to: maintain digital accounts of receipt and removal of goods and submit them to the bond officer every month; execute a bond in the prescribed format, which under Circular 34/2019 also satisfies the separate triple-duty bond that Section 59 of the Customs Act requires for warehoused goods; and declare input-output norms for raw materials and finished products, updating them whenever they change. A warehouse keeper with a digital signature must be appointed to sign and file the required electronic records on the licensee's behalf.
Once granted, the permission has no expiry and needs no renewal — it stays valid until cancelled or surrendered, or until the underlying Section 58 licence is itself cancelled or surrendered.
Duty Treatment by Destination
| What happens to the goods | Duty on imported capital goods | Duty/tax on imported inputs |
|---|---|---|
| Cleared to the domestic market (home consumption) | Deferred duty becomes payable on clearance for home consumption under Section 68 of the Customs Act, with no interest | Import duty on the inputs contained in the finished product is payable via an ex-bond bill of entry; GST and compensation cess are separately payable on the finished product under the CGST/IGST Act |
| Exported (as finished goods or, after use, as capital goods) | No duty payable — cleared under Section 69 of the Customs Act | Duty on the imported inputs contained in the exported product stands remitted (never paid) |
| Waste or refuse from manufacture | Cleared for home consumption on payment of applicable customs duty and GST under Section 65(2)(b); if the resultant product is exported, duty on the waste is paid manually by challan under the proviso to Section 65(2)(a) | |
Both Basic Customs Duty and IGST on imports are deferred, whether the imported item is a capital good or an input, and the deferment carries no time limit. Duty on a capital good is never folded into the duty payable on the finished goods made using it — the two are accounted separately, so clearing finished goods to the domestic market does not itself trigger duty on the capital equipment that made them, unless that equipment is separately cleared to the domestic market too.
Sourcing, Compliance, and Oversight
Capital goods and inputs can be sourced through imports or from the domestic market, though normal domestic taxes apply to domestic procurement — Section 65 permission alone does not make it duty-free. Goods moving between a customs station and the warehouse, or between warehouses, generally travel under a one-time-lock seal, though a Commissioner can permit movement without one for particular goods. There is no routine physical control by customs at the premises; units face risk-based audit with no fixed frequency, and ex-bonding inspection happens only on a specific risk indication. A licensee can also combine other duty benefits — such as those under the Foreign Trade Policy or the Customs (Import of Goods at Concessional Rate of Duty) Rules — with MOOWR, where the terms of that other scheme allow it.
Why MOOWR Matters for Foreign Companies and Investors
For a foreign company deciding where to locate manufacturing that will serve both India and export markets, MOOWR removes a major cash-flow drag: paying customs duty on imported machinery and inputs before a single unit is produced or sold. Because there is no minimum investment and no geographical restriction, MOOWR is available to a large plant in an industrial corridor and to a small assembly unit in a leased facility alike, and because there is no export obligation, a subsidiary can plan to sell predominantly into the Indian market and still defer duty on the machinery and components it imports to do so.
This makes MOOWR a genuine alternative — not a substitute — for foreign investors weighing it against India's other duty-benefit regimes. A Special Economic Zone unit gets duty-free imports too, but only inside a designated zone; EPCG and Advance Authorization require a fixed export obligation within a set number of years, calculated as a multiple of duty saved. MOOWR has neither restriction, which suits manufacturers who want to sell into India, export, or do both, and adjust that mix over time.
Common Mistakes
- Treating MOOWR as a duty exemption. It is a duty deferment scheme. Duty is not exempted — it is postponed until the goods leave the warehouse, and it becomes payable in full (without interest) if they are cleared into the domestic market rather than exported.
- Assuming domestic procurement is duty-free because the unit holds Section 65 permission. Only imported goods brought into the bonded warehouse get the deferment. Goods procured domestically for the same unit are subject to the normal GST and any exemptions that would otherwise apply to that procurement — MOOWR permission by itself changes nothing there.
- Forgetting the underlying Section 58 warehouse licence. MOOWR permission cannot stand alone; the premises must also be licensed as a private bonded warehouse under Section 58, and the two applications are typically filed together on the single combined form.
- Assuming duty on capital goods carries interest, or that depreciation reduces it. Deferred duty on capital goods cleared to the domestic market is payable without interest, but also without any depreciation allowance for the period the goods were used inside the warehouse.
- Confusing MOOWR with duty drawback. MOOWR defers duty that has not yet been paid on imports still sitting in bond; duty drawback refunds duty that has already been paid on imports that are later exported or re-exported. They apply to different fact patterns and are not interchangeable.
Practical Example
A foreign electronics group sets up an Indian subsidiary to assemble a product using an imported testing machine (capital good) and imported components (inputs), alongside components sourced locally. The subsidiary secures a Section 58 private bonded warehouse licence together with Section 65 permission on the combined application form, executes the prescribed bond, and appoints a warehouse keeper with a digital signature.
The testing machine and the imported components enter the warehouse with Basic Customs Duty and IGST deferred and no interest running. Two years later, 40% of assembled units are exported directly from the warehouse: the duty on the imported components contained in those units is remitted entirely, and no duty is paid on them. The remaining 60% are cleared into the Indian market: the subsidiary files an ex-bond bill of entry, pays import duty on the components contained in those units, and charges GST on the finished product. The testing machine stays in continued use, so no duty is triggered on it — that would only happen if the machine itself were later cleared to the domestic market.
Key Takeaways
- MOOWR defers, rather than exempts, Basic Customs Duty and IGST on imported inputs and capital goods brought into a licensed private bonded warehouse for manufacture, with no interest on the deferred amount and no time limit
- Duty is fully remitted on exported finished goods and on capital goods exported after use; it becomes payable only when goods are cleared into the Indian domestic market
- There is no minimum investment, no export obligation, and no geographical restriction — MOOWR suits a unit that wants to sell in India, export, or both
- A single combined application (Section 58 warehouse licence plus Section 65 permission) is filed with the jurisdictional Principal Commissioner or Commissioner of Customs, and the resulting permission does not need renewal
- Clearance to the domestic market triggers import duty on the inputs in the finished product plus GST on the finished product itself, while GST paid is available as credit
Frequently Asked Questions
Is MOOWR a duty exemption scheme?
No. MOOWR is a duty deferment scheme. Customs duty on imported capital goods and inputs is postponed while the goods remain in the bonded warehouse, and becomes payable, without interest, only if the goods or the finished product made from them are cleared into the Indian domestic market rather than exported.
Does a MOOWR unit have to export any part of its production?
No. There is no export obligation under MOOWR. A unit can clear all, some, or none of its output to the domestic market — the only consequence of a domestic clearance is that the deferred duty on the imported inputs or capital goods involved becomes payable, along with GST on the finished product.
Can an existing factory that only sells in India apply for MOOWR?
Yes. Eligibility does not depend on whether output is exported. An existing unit in the domestic tariff area can apply for a Section 58 warehouse licence together with Section 65 permission, and must account for its existing capital goods and inputs in the prescribed accounting form when it starts operating under the scheme.
Does the MOOWR licence need to be renewed?
No. Once granted, permission under Section 65 read with the MOOWR (No. 2) Regulations, 2019 remains valid indefinitely, until it is cancelled or surrendered, or until the underlying Section 58 private warehouse licence is cancelled or surrendered.
How is MOOWR different from an SEZ unit or the EPCG scheme?
An SEZ unit gets duty-free imports but must operate inside a designated zone; EPCG and Advance Authorization require a fixed export obligation tied to the duty saved. MOOWR has neither restriction — it can be set up anywhere and carries no export obligation, though duty deferred on domestic clearances must eventually be paid.
See also: Customs Duty, SEZ (Special Economic Zone), and EPCG Scheme & Advance Authorization.
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