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In 2019, the Indian government introduced the “Manufacture and Other Operations in Warehouse Regulations” to promote manufacturing and other operations within bonded warehouses across the country. These regulations aim to simplify processes, reduce costs, and facilitate ease of doing business for companies operating in such warehouses.
This initiative enables the import of inputs and capital goods into bonded warehouses without paying customs duties for manufacturing and other operations. The scheme is accessible to ‘units’ (warehouses conforming to the regulation requirements) that are authorized to conduct manufacturing or other operations in warehouses or special warehouses, as permitted under the Customs Act, 1962. Moreover, the scheme is extended to existing units interested in performing operations in customs bonded warehouses. The primary goal of this initiative is to promote liberalization of manufacturing and other activities within customs bonded warehouses.
Summary of benefits of MOOWR license:
- Deferment of import duty payments on raw material and capital goods
- Waiver of interest on deferred customs duty payments
- Seamless warehouse-to-warehouse transfer
- No obligation to export
- Unlimited period for warehousing
- No geographical restrictions
- No investment threshold
- Single point of approval
- Overall compliance ease
In this blog post, we will discuss the key features of these regulations and their potential benefits for businesses in India.
Potential Benefits for Businesses: The “Manufacture and Other Operations in Warehouse Regulations 2019” offer several benefits for businesses operating in bonded warehouses in India, such as:
a. Reduced costs: The duty deferment provisions help businesses reduce their upfront costs, allowing them to invest in expanding their operations and improving their competitiveness.
b. Enhanced competitiveness: The streamlined processes and flexibility in operations enable businesses to respond quickly to market demands, enhancing their competitiveness in both domestic and international markets.
c. Attracting foreign investment: The simplified regulatory framework and reduced costs make India an attractive destination for foreign investors looking to set up manufacturing and other operations in bonded warehouses.
d. Boosting exports: The availability of export incentives encourages businesses to manufacture goods for export, contributing to India’s overall export growth and strengthening its position in global trade.
Key Features of the Regulations: The main features of the “Manufacture and Other Operations in Warehouse Regulations 2019” include:
a. Simplified approval process: The regulations provide a streamlined and time-bound approval process for setting up manufacturing and other operations in bonded warehouses. Companies only need to obtain a single license from the customs authorities.
b. Flexibility in operations: Businesses operating in bonded warehouses are allowed to carry out various activities such as manufacturing, processing, packaging, and labeling without any restrictions on the type or quantity of goods, subject to compliance with the applicable laws and regulations.
c. Duty deferment: Companies can defer the payment of customs duties on imported raw materials, components, and capital goods used in the manufacturing process until the finished products are cleared for domestic consumption or export. This can significantly improve cash flow for businesses.
d. Export incentives: Finished goods manufactured in bonded warehouses are eligible for various export incentives and benefits under India’s foreign trade policy, including duty drawback and other export promotion schemes.
Conditions to apply for a MOOWR License :
Application submission: The applicant must submit a duly filled application form to the jurisdictional Principal Commissioner or Commissioner of Customs, providing details of the proposed bonded warehouse, the intended manufacturing or other operations, and the goods to be stored or processed.
Financial solvency: The applicant must demonstrate financial solvency, ensuring that they possess the necessary financial resources to meet the obligations arising from the warehouse operations.
Compliance with laws and regulations: The applicant must comply with all applicable laws, rules, and regulations related to the proposed activities, including those concerning taxation, labor, environment, safety, and public health.
Security and safety requirements: The bonded warehouse must meet the prescribed security and safety requirements to prevent theft, pilferage, or damage to the stored goods. This may include provisions for secure storage, access control, CCTV surveillance, fire safety measures, and other necessary measures.
Record-keeping and reporting: The licensee must maintain accurate records of all goods stored, processed, or removed from the bonded warehouse, including details of the relevant customs duties, taxes, and other levies. Regular reports must be submitted to the customs authorities as required.
Execution of a bond: The applicant must execute a bond with the customs authorities, committing to pay the customs duties, taxes, and other levies due on the goods stored or processed in the bonded warehouse.
Payment of fees: The applicant must pay the prescribed fees for obtaining and renewing
Frequently Asked Questions:
Any business entity, whether domestic or foreign, looking to set up manufacturing or other operations within a bonded warehouse in India can apply for a license under these regulations.
The time required to obtain the license may vary depending on individual cases and the efficiency of the customs authorities. However, the regulations aim to provide a streamlined and time-bound approval process to minimize delays.
The validity period of the license may vary depending on the jurisdiction and the specific terms granted by the customs authorities. It is essential to review the terms and conditions of your license to determine the validity period and renewal requirements.
While the regulations allow for flexibility in operations, businesses must still comply with all applicable laws and regulations related to the goods they intend to store or process. This may include restrictions on specific goods, such as hazardous materials, prohibited items, or goods subject to special permits or licenses.
The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the scheme allows, unit operating under Section 65 has no impact on the eligibility. In other words, a unit operating under Section 65 can avail any other benefit, if the benefit scheme allows.
Inputs/raw materials can be imported and deposited in the licensed warehouse without payment of BCD and IGST. No interest liability arises when the duties are paid at the time of ex-bonding the resultant goods. The duties (without any interest) are to be paid only when the resultant goods are being cleared for home consumption.
About Rohit Lohade
Rohit Lohade is a Chartered Accountant with 15+ years of experience. He has assisted more than 300 Gobal Companies with India Entry Strategy