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MOOWR duty deferment works by shifting the point at which customs duty becomes chargeable. Under Sections 58 and 65 of the Customs Act, 1962, goods enter a licensed private bonded warehouse on a Bill of Entry for warehousing, without payment of Basic Customs Duty or IGST.
Duty is deferred, not exempted. It falls due when the goods, or the resultant goods containing them, are cleared for home consumption. Only export removes the liability entirely.
This is the mechanism most explanations skip. Under the proviso to Regulation 14, published by CBIC, import duty in respect of the warehoused goods contained in so much of the resultant goods becomes payable at the time those resultant goods are removed for home consumption.
You do not pay duty on the finished article. You pay on the imported inputs embedded in the quantity you clear. An ex-bond Bill of Entry is filed for those contained warehoused goods, and a GST invoice is issued for the supply.
Under Section 15(1)(b), the rate of duty and tariff value for goods cleared from a warehouse is the rate in force on the date the ex-bond Bill of Entry for home consumption is presented.
The value, however, is the value assessed on the into-bond Bill of Entry when the goods were originally warehoused. A practical consequence follows: you may claim any exemption available under a Customs Tariff notification as on the clearance date, not the import date.
Duty on capital goods stands deferred until they are cleared from the warehouse or exported. It is never incorporated into the finished goods. No extra duty is payable on products cleared into the domestic market on account of the machinery used to make them.
If the capital goods themselves are cleared into the domestic market, duty falls due on the original assessed value, with no depreciation allowed. Exported after use, they attract no duty at all under Section 69.
Where resultant goods are exported under a shipping bill, the deferred duty on the imported inputs contained in them is remitted. Nothing is ever paid. That is an absolute saving rather than a timing benefit.
Prior permission of the proper officer is not required for removal. Under Regulations 13, 14, and 15, the licensee files the due documentation and pays any duties owed, which suffices.
The no-time-limit position is often stated without its qualification. Section 61(1) allows goods in a Section 65 warehouse to remain until consumption or clearance, and capital goods until clearance, with no interest.
But because the warehouse also functions as a Section 58 warehouse, the licensee may import goods and clear them as such under Section 68, on payment of import duties along with interest under sub-section (2) of Section 61. Interest runs from ninety days after the date of deposit. Goods never put to manufacture are not covered by the interest-free carve-out.
MOOWR duty deferment leaves a liability, not a saving. The deferred amount sits on the balance sheet until the goods leave. A unit that has enjoyed deferment for years can face a substantial crystallised charge on a large domestic clearance or at surrender.
The durable benefit is the interest cost saved on non-creditable duties, principally BCD and Social Welfare Surcharge, for the period the goods remain warehoused. IGST is creditable, so deferring it is a float rather than a cost avoided.
Accounts of receipt, processing, and removal are maintained in the form at Annexure B of Circular No. 34/2019 and furnished digitally to the bond officer monthly under Regulation 17.
Because duty is computed on the inputs contained in what you clear, your records must correlate imported inputs to resultant goods. Self-declared input-output norms are furnished at application, and any revision must be reported. SION norms do not apply.
At JPARKS INDIA, we set up the input-output norms and Annexure B accounts so the duty payable on each clearance is defensible, separate any trading stock so its Section 61(2) interest position is visible, and model the deferred liability before it crystallises. Having served 500+ importers and exporters since 2018, we make deferment work as intended. Learn more about our MOOWR scheme services or book a free consultation.
Goods enter a bonded warehouse without payment of BCD or IGST. Duty becomes payable on the warehoused goods contained in the resultant goods when those are cleared for home consumption, via an ex-bond Bill of Entry.
Under Section 15(1)(b), the rate in force on the date the ex-bond Bill of Entry is presented. The value is the value assessed on the into-bond Bill of Entry. Exemptions available on the clearance date may be claimed.
Not for goods used in the Section 65 operation, which may remain until consumption or clearance with no interest. Goods cleared as such, without being put to manufacture, attract interest under Section 61(2) beyond ninety days.
Yes, on export. Where resultant goods are exported, the deferred duty on the imported inputs contained in them is remitted entirely. Capital goods exported after use also attract no duty under Section 69.
No. Duty on capital goods is not incorporated into the finished goods. It becomes payable only if the capital goods themselves are cleared into the domestic market.
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