Duty Payment
How to Pay Duty Under MOOWR Scheme – Complete Process Explained
Under the MOOWR Scheme (Manufacture and Other Operations in Warehouse Regulations, 2019), importers can defer the payment of customs duties on capital goods and raw materials by storing them in a bonded warehouse (factory). This duty deferment facility significantly improves working capital efficiency and provides a competitive edge, especially for manufacturers who rely on imported inputs and capital goods for their manufacturing operations.
Understanding the duty payment process under MOOWR is essential for ensuring compliance and availing full benefits under the scheme. Below is a detailed guide on how to pay customs duty under MOOWR, the timing of payment, applicable procedures, and calculation methodology.
When Duties Are Paid
1) For raw materials: At time of domestic sale of finished goods.
2) For exports: No duties payable on imported materials used.
3) For capital goods: Only when physically removed from unit.
Duty Payment Procedure
1) File Ex-bond Bill of Entry before clearance.
2) Pay applicable duties on ICEGATE portal.
3) Duties calculated at rates applicable on filing date.
Calculation Basis
1) For raw materials: Pay only on value of imported materials consumed.
2) For capital goods: Pay on original import value.
3) No depreciation benefit allowed for duty calculation.
When is Customs Duty Payable on Imported Inputs Under MOOWR?
The MOOWR Scheme provides a significant advantage by deferring customs duty on imported inputs until the point of actual domestic clearance. The timing of duty liability depends entirely on whether the goods are sold domestically or exported. Here’s how it works:
1. For Domestic Sale of Finished Goods:
Customs duty on imported raw materials becomes payable only when the finished goods manufactured using those inputs are cleared for sale in the Indian domestic market.
This means that you can import raw materials without upfront duty payment, store and consume them in your bonded warehouse (factory), and pay customs duty only on the quantity of imported material used in the goods being sold domestically. The duty is required to be paid on the same day on which these goods are sold.
2. For Exports of Finished Goods:
If the finished goods manufactured using imported inputs are exported directly from the bonded warehouse (factory) under proper documentation, no customs duty is payable at all on the imported raw materials consumed in the export production.
This provision makes the MOOWR Scheme highly attractive for export-oriented units, as it offers complete exemption from customs duties on inputs used in exports — thereby significantly reducing landed cost and improving global competitiveness.
Scenario:
A company imports 10,000 kg of steel coils under MOOWR and stores it in its bonded warehouse (factory). The imported value of the steel is ₹100/kg (CIF), and applicable Basic Customs Duty (BCD) is 10%.
Out of this, the company uses 6,000 kg to manufacture finished goods. 4,000 kg worth of goods are exported, and 2,000 kg worth of goods are sold in the domestic market.
Duty Payable:
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Only on 2,000 kg used in domestic sale.
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Import Value = 2,000 kg × ₹100 = ₹2,00,000
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BCD @10% = ₹20,000
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IGST and other levies (if applicable) also payable on this value.
Conclusion:
No duty is payable on the quantity used for exports. Only the portion used in domestic clearances attracts duty.
When is Customs Duty Payable on Capital Goods Under MOOWR?
Under the MOOWR Scheme (Manufacture and Other Operations in Warehouse Regulations, 2019), customs duty on imported capital goods is not payable at the time of import. Instead, duty is deferred until the capital goods are physically removed from the bonded warehouse (factory).
This deferment mechanism is one of the key benefits of MOOWR, as it allows manufacturers to install and use capital goods like machinery, equipment, and tools without blocking working capital in the form of upfront customs duty.
Key Duty Payment Conditions for Capital Goods:
No duty payable as long as capital goods remain within the bonded warehouse (factory).
Duty becomes payable only at the time of removal of the capital goods from the premises — whether for sale, transfer, or scrapping.
Duty is calculated on the original CIF (Cost, Insurance, and Freight) value declared at the time of import, irrespective of the number of years the capital goods were in use.
No depreciation is permitted while determining the assessable value for customs purposes under MOOWR. Not to be confused with Income Tax Depreciation.
There is no restriction on the Depreciation under Income Tax and the same can be claimed on the CIF value of the imported capital goods.
Scenario:
A company imports a CNC machine under the MOOWR Scheme at a CIF value of ₹50 lakhs. The applicable Basic Customs Duty (BCD) is 7.5%. The machine is installed and used within the bonded factory premises for 7 years. Later, the company decides to remove the machine for sale in the domestic market for a consideration of ₹10 lakhs.
Duty Payable:
The customs duty is payable on the original import value (₹50 lakhs), not on the sale value of ₹10 lakhs.
Import Value: ₹50,00,000
BCD @7.5%: ₹3,75,000
IGST and Social Welfare Surcharge, as applicable, are also payable on ₹50 lakhs.
The IGST paid at the time of removal will be available as input credit, subject to conditions.
Key Point:
Depreciation of capital goods or the reduced transaction value is not considered while calculating duty liability. The duty is always calculated on the original CIF value declared at the time of import.
Conclusion:
Despite 7 years of usage, full customs duty (including IGST) is payable on the original import value at the time of removal from the bonded premises. However, no interest is levied on the deferred duty, even after prolonged usage.
Hence, the company benefits from an interest-free deferment of duty for 7 years, effectively utilizing that capital for operational or financial leverage during the bonded period.