What is the MOOWR Scheme in Customs?

What is the MOOWR scheme in customs has a precise answer. MOOWR stands for the Manufacture and Other Operations in Warehouse Regulations, 2019, notified under Section 65 of the Customs Act, 1962. It permits a business to license its premises as a private bonded warehouse, import inputs and capital goods without paying Basic Customs Duty or IGST upfront, manufacture inside, and pay duty only when goods are cleared into the domestic market. If the resultant goods are exported, the deferred duty is remitted.

The word is Manufacture, not Manufacturing. A great deal of published guidance gets this wrong, including sources that otherwise summarise the scheme accurately.

What is the MOOWR Scheme in Customs: Deferment, Not Exemption

This distinction governs everything else. MOOWR does not waive duty. It postpones it, without interest and without a time limit.

Inputs cleared domestically: duty payable on the imported goods contained in the resultant product, at the time of supply, via an ex-bond Bill of Entry.
Inputs exported: deferred duty remitted under Section 69. Nothing payable.
Capital goods: duty deferred while in use. If later cleared domestically, duty is computed on the original CIF value, with no depreciation, however many years the machine ran.

Describing capital goods under MOOWR as receiving duty relief is therefore inaccurate. A machine imported at Rs. 50 lakh and de-bonded after seven years attracts duty on Rs. 50 lakh, not on its written down value. Our note on raw materials and capital goods works this through.

Where the Scheme Comes From

Section 65 of the Customs Act, 1962 has long permitted manufacture and other operations on warehoused goods. What changed in 2019 was the framework around it. The Manufacture and Other Operations in Warehouse Regulations, 2019 were notified under Notification No. 69/2019-Customs (N.T.) dated 1 October 2019, consolidating Circular No. 38/2018-Customs into Circular No. 34/2019-Customs of the same date.

The regulations run to twenty provisions covering scope, eligibility, grant and validity of permission, appointment of a warehouse keeper, facilities and personnel, receipt and transfer of goods, removal for home consumption and export, maintenance of records, audit and penalty. The licence, once granted, is perpetual and requires no renewal.

Why the Scheme Exists

Duty paid at the port is working capital removed from the business before a single sale has occurred. MOOWR defers that outflow to the point of sale. For an import intensive manufacturer that is a structural improvement in cash flow, not a marginal saving.

Crucially, the benefit is not conditioned on exports. EPCG demands an export obligation of six times the duties saved over six years. Advance Authorisation demands a minimum fifteen percent value addition. MOOWR demands neither, and a unit may sell one hundred percent of its output domestically. That delinking from export performance is also why the scheme sits comfortably with World Trade Organisation norms.

Who Benefits, and Who Is Now Barred

Import intensive sectors gain most. Electronics, electric vehicles, pharmaceuticals, auto components, defence and precision manufacturing all import components heavily and all benefit from deferment. So do traders performing permitted operations such as sorting, repacking, labelling, testing and repair.

The solar exclusion

One sector is now expressly outside the scheme, and most guidance has not caught up.

CBIC issued Instruction No. 13/2022-Customs on 9 July 2022, directing officers to refuse fresh MOOWR licences to solar power generating units and to review existing ones. In ACME Heergarh Powertech Private Limited v. CBIC, decided 6 May 2024, the Delhi High Court quashed that instruction, holding that Section 65 uses no words of limitation as to the nature of goods and cannot be read as excluding a particular activity.

That victory was then legislatively reversed. The Finance (No. 2) Act, 2024 inserted a proviso to Section 65(1) empowering the Central Government to notify manufacturing processes and operations, in relation to a class of goods, that shall not be permitted in a warehouse. CBIC has since notified that goods imported for solar power generation are not permitted for any manufacturing process or operation in a warehouse.

Any guidance citing ACME Heergarh as good news for new solar applicants is out of date. The judgment stands on its reasoning, but the statutory basis it interpreted has been amended.

What the Scheme Costs

Three things a fair answer to what is the MOOWR scheme in customs has to include.

No RoDTEP, no duty drawback. Products manufactured wholly or partly in a Section 65 warehouse sit on the RoDTEP ineligibility list. The bar is premises based, so goods from a separate non MOOWR factory may still qualify.
No depreciation on capital goods. As above. IGCR, by contrast, permits it.
Duty on waste. Where the resultant product is cleared domestically, duty is payable on the warehoused goods contained in the waste. Destroyed waste attracts none.

A further caution. Section 65A, inserted by the Finance Act, 2023, would require IGST and compensation cess on deposit rather than on clearance. Its effective date has not been notified, so any model resting on deferred IGST should treat that line as contingent.

An Operational Point Rarely Mentioned

The warehouse code issued on licensing must be mapped at every port from which the unit imports, and a triple duty bond submitted at each of those import ports. A single licence does not automatically function across all ports without this step. Filings run through ICEGATE, and export documentation under the Directorate General of Foreign Trade framework.

Frequently Asked Questions

Q1. What is the MOOWR scheme in customs, in one sentence?

What is the MOOWR scheme in customs comes to this: a duty deferment framework under Section 65 of the Customs Act, 1962, letting a licensed private bonded warehouse import inputs and capital goods without upfront Basic Customs Duty or IGST, with duty payable only on domestic clearance and remitted on export.

Q2. What is the full form of MOOWR?

Manufacture and Other Operations in Warehouse Regulations, 2019. The word is Manufacture, not Manufacturing, though the incorrect form appears widely.

Q3. Is MOOWR an exemption or a deferment scheme?

A deferment scheme. Duty is postponed, without interest and without a time limit, and becomes payable on clearance into the domestic market. It is remitted only where the goods are exported.

Q4. Can solar power generating units use MOOWR?

No. Following the Finance (No. 2) Act, 2024 and the subsequent CBIC notification, goods imported for solar power generation are not permitted for manufacturing processes or operations in a warehouse, notwithstanding the earlier Delhi High Court judgment in ACME Heergarh Powertech.

Q5. Does MOOWR require an export obligation?

No. There is no export obligation, no minimum export performance and no net foreign exchange requirement. A unit may sell its entire output domestically.

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