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The MOOWR working capital saving is real, but it is routinely overstated. Under Sections 58 and 65 of the Customs Act, 1962, Basic Customs Duty, Social Welfare Surcharge, and IGST are all deferred at import. Not all of them are a cost.
IGST paid at the border is creditable. What MOOWR defers on IGST is a float, not a saving. The durable benefit sits in the non-creditable duties.
The MOOWR working capital saving rests on BCD and SWS, which are a cost to the business. They are not recoverable and they sit in your landed cost. Deferring them frees cash for as long as the goods remain warehoused, with no interest.
IGST is different. An importer paying IGST at the border claims input tax credit and sets it off against output GST. The cash-flow gap between paying and recovering is real but short, typically a matter of weeks. Deferring IGST removes that gap. It does not remove a cost.
Take a manufacturer importing capital goods, paying 7.5 per cent BCD plus 10 per cent SWS on that duty, so 8.25 per cent in total. On imports of a given value, that 8.25 per cent is not paid at import and is payable only when the machinery is removed from the bonded premises.
If the machine stays in the factory for twenty years, the benefit is the interest cost saved on that 8.25 per cent for twenty years. That is the number worth quoting, and it is the interest saved, not the duty itself. The duty remains a liability until the machine leaves.
On the portion of output that is exported, the deferred duty on the imported inputs contained in those goods is remitted entirely. Nothing is ever paid. That is an absolute saving rather than a timing benefit.
Capital goods exported after use also attract no duty under Section 69, irrespective of sale price. If your equipment has a plausible export route at end of life, the deferment converts into a genuine saving.
Some guidance claims capital goods under MOOWR yield a permanent duty saving because machinery stays in the factory. That is not correct. Duty falls due if the capital goods are ever cleared into the domestic market, and no depreciation is allowed.
Duty is computed on the original assessed value, not the depreciated or resale value. A machine imported at fifty lakh and sold seven years later for ten lakh attracts duty on fifty lakh. The deferred amount is a balance-sheet liability, not a windfall.
This constraint is rarely mentioned. The value of goods that may be imported under deferment is determined by the solvency certificate furnished. A solvency certificate of one crore permits duty deferment up to that amount.
Additional solvency certificates can be submitted to raise the limit. Size this before you plan a large import programme, because the headline benefit is bounded by it.
No interest accrues on goods used in the Section 65 operation, however long they remain. But goods imported and cleared as such, without being put to manufacture, attract interest under Section 61(2) beyond ninety days from the date of deposit, per CBIC.
A trading component inside a bonded facility can therefore erode the very benefit the licence was obtained for. Track those goods separately.
Any MOOWR working capital saving must be netted against what the scheme forfeits. MOOWR gives up RoDTEP and duty drawback on goods manufactured wholly or partly in the Section 65 warehouse. There is no depreciation relief on capital goods, and the Section 65A withdrawal of IGST deferment sits on the statute book awaiting notification.
Set the interest saved on deferred BCD and SWS against the forfeited RoDTEP stream, the compliance cost of Regulation 17 digital returns, and the eventual duty on capital goods. Then the number means something.
At JPARKS INDIA, we build the working capital model properly: creditable versus non-creditable duties, expected dwell times, export ratio, cost of capital, RoDTEP forfeiture, and the eventual capital goods liability. Where MOOWR wins we implement it, and where it does not we say so. Having served 500+ importers and exporters since 2018, we make the number defensible. Learn more about our MOOWR scheme services or book a free consultation.
The durable saving is the interest cost on deferred BCD and SWS for the period goods remain warehoused, plus the float on deferred IGST. IGST itself is creditable, so it is a timing benefit rather than a cost saved.
No. IGST paid at import is creditable against output GST. Deferring it removes the cash-flow gap between payment and credit recovery, which is a float rather than a cost. Where IGST is not creditable to the business, the benefit is larger.
No. Duty becomes payable if the capital goods are cleared into the domestic market, computed on the original assessed value with no depreciation. Only export after use under Section 69 avoids duty entirely.
Yes. The deferment is bounded by the solvency certificate furnished. A solvency certificate of one crore permits deferment up to that amount, and additional certificates may be submitted to increase the limit.
Yes, on duty that would otherwise have been financed at import. But goods cleared as such, without being put to manufacture, attract interest under Section 61(2) beyond ninety days.
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