Indirect Tax News - December 2020

Import initiative - The Manufacture and Other Operations in Warehouse Regulation

In furtherance of India’s goal of promoting itself as a manufacturing hub and to help make it easy to do business in India, the Central Board of Indirect Taxes and Customs (CBIC) introduced an important initiative. The initiative allows for import of inputs and capital goods into bonded warehouses without payment of customs duty for manufacturing and other operations. This scheme is available to ‘units’ (warehouses that meet the requirements of the regulation) that are allowed to manufacture or undertake other operations in warehouses or special warehouses, as permitted under the Customs Act, 1962. As well, the scheme is also extended to existing units that wish to carry out operations in Customs bonded warehouse. This initiative is aimed at liberalising manufacturing and other activities in customs bonded warehouses.

Procedures and advantages of the regulation

Under the “Manufacture and Other Operations in Warehouses Regulation” (MOOWR), a unit can import raw materials and capital goods without payment of import duty for the purpose of carrying out manufacturing and other processes to export the manufactured goods or to clear the same for home consumption. Import duty is waived on raw materials used in export production. On goods cleared for home consumption, Goods and Services Tax (GST) will be due on the finished goods and a proportionate import duty on the raw materials used will be due.

The warehouse must file an application under this regulation with the appropriate customs officer and the warehouse is obliged to: maintain accounts in digital form, create requisite facilities in the warehouse, execute a bond, submit security for a specified amount, submit the ‘input-output norm’ that defines the amount of input(s) required for manufacture of a unit of output, pay for the services of customs officers (wherever applicable), and comply with other terms and conditions. The permission granted shall remain valid until the warehouse licence is cancelled or surrendered. Units are permitted to carry out manufacturing or other processes in a bonded warehouse and trade the output in the domestic market without any limit (subject to payment of applicable taxes/duties).

The key advantages of MOOWR are deferment of import duty payments and waiver of interest on customs duty payments deferred until the finished goods leave the warehouse, seamless warehouse-to-warehouse transfer, absence of an obligation to export, unlimited period for warehousing, no geographical restrictions, no investment threshold, a single point of approval, and overall compliance ease. 

MOOWR requires the units to provide information about the input-output norms; the warehouse can either adopt the ‘Standard Input-Output Norms’ provided under India’s Foreign Trade Policy or a norm that may be specific for that unit/industry, which can be satisfactorily explained to the authorities. It should also be noted that operations that may not normally be construed as manufacturing can also take advantage of the scheme.


MOOWR is an especially beneficial scheme because, unlike other export schemes, there is no obligation to export, nor are there limits placed on domestic sales or foreign exchange realisation requirement, as well as easier compliance rules. The scheme affords flexibility to sell goods into the domestic market or to overseas buyers and it is expected to attract more investments.

Dinesh Kumar B