MOOWR Scheme Under Section 65: Strategic Duty Deferral Tool for Indian Manufacturers

1. Overview of the MOOWR Framework

The “Manufacturing and Other Operations in Warehouse” scheme, popularly known as the MOOWR Scheme, operates under Section 65 of the Customs Act, 1962. It allows units to carry out manufacturing and specified operations inside a customs bonded warehouse, with a core benefit: customs duty and IGST on imported capital goods and inputs are deferred until the point of clearance for home consumption.

Originally conceptualised in 1996, the scheme was comprehensively modernised in 2019 through:

  • Section 65 of the Customs Act, 1962
  • Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019 (MOOWR Regulations, 2019)
  • Notification 69/2019 dated 01.10.2019

The scheme aligns with the Make in India policy by improving cash flow, reducing upfront tax funding and integrating manufacturing with bonded warehousing in a seamless manner.

Under MOOWR, the assessee can:

  • Import capital goods and raw materials without upfront payment of customs duty and IGST.
  • Use such goods in a bonded warehouse licenced under Section 58 or Section 58A.
  • Pay customs duty and IGST only when the resultant goods or capital goods are eventually cleared for home consumption.

2. Statutory and Regulatory Ecosystem

2.1 Applicable Provisions for Private Bonded Warehouses

For units operating in private bonded warehouses, the following statutory provisions and instruments are relevant:

  • Section 58 – Licensing of Private Warehouses
  • Section 65 – Manufacture and other operations in relation to goods in a warehouse
  • Section 65A – Goods brought for operations in warehouse to have ordinarily paid certain taxes
  • Notification 69/2019 dated 01.10.2019 – Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019
  • Circular 34/2019 dated 01.10.2019 – Procedure for manufacturing/other operations in bonded warehouses under Section 65
  • Circular 28/2025 dated 25.11.2025 (effective 15.10.2025) – Launch of online ICEGATE 2.0 module for licence under Section 65
  • Notification 71/2016 dated 14.05.2015 – Private Warehouse Licensing Regulations, 2016 (PWLR, 2016)

2.2 Applicable Provisions for Special Bonded Warehouses

For special warehouses registered under Section 58A, the legal structure mirrors the above, with specific regulations:

  • Section 58A – Licensing of Special Warehouses
  • Section 65 – Manufacture and other operations in relation to goods in a warehouse
  • Section 65A – Goods brought for operations in warehouse to have ordinarily paid certain taxes
  • Notification 75/2020 dated 17.08.2020 – Manufacture and Other Operations in Special Warehouse Regulations, 2020
  • Circular 36/2020 dated 17.08.2020 – Procedural guidelines for operations in special warehouses under Section 65

3. Core Objectives of the MOOWR Scheme

3.1 Duty Deferral Instead of Upfront Payment

The MOOWR structure converts the import duty payment model into a “pay-when-you-clear” approach:

  • No customs duty or IGST is payable at the time of import.
  • The liability is postponed to the date when goods are ex-bonded for home consumption.
  • For goods exported directly from the bonded premises, duty burden is effectively neutralised as per existing customs export provisions.

3.2 Strengthening the Make in India Initiative

By deferring customs duty and IGST on imports used in manufacturing, the scheme:

  • Reduces pressure on working capital that would otherwise be blocked in taxes.
  • Lowers the cost of setting up or expanding manufacturing operations.
  • Enhances price competitiveness of Indian manufactured goods in domestic and global markets.

3.3 Enhancing Ease of Doing Business

Key operational simplifications include:

  • Bonded warehousing can be approved within the existing factory premises, avoiding the need for separate locations.
  • Streamlined clearances for home consumption and exports from a central point.
  • Reduced recurring compliance at the import stage, as repetitive customs clearances are avoided.

3.4 Operational Flexibility

The scheme allows:

  • Procurement of materials from the Domestic Tariff Area (DTA) and their storage in the bonded premises for further processing.
  • Self-determined input-output norms, instead of rigid standard norms.
  • Transfer of imported capital goods and inputs between MOOWR warehouses, or to job workers, under prescribed control.

4. Eligibility, Approvals and Licensing Procedure

4.1 Who Can Apply? (Regulation 4)

An entity is eligible where:

  • It is already registered as a private/special bonded warehouse under Section 58 or Section 58A; or
  • It simultaneously seeks registration under Section 58 along with permission under Section 65.

Note: The applicant must be an Indian citizen or an entity incorporated/registered under Indian law.

4.2 Documentation and Declarations

Typical information and documentation include (illustrative):

  • PAN, GST registration, IEC
  • Certificate of incorporation, Memorandum and Articles of Association, or partnership deed (in case of firms/companies)
  • Registered office details
  • Names, addresses and DIN/ID proofs of proprietor/partners/directors
  • Bank account details and bank solvency certificate (exempt for Central/State Government undertakings)
  • Authorized signatory details with Aadhaar proof
  • Details of existing Indian and overseas manufacturing facilities of the assessee and its key managerial persons
  • Address and layout of the proposed warehouse, with boundary description
  • Title/lease documentation for the premises; NOC from lessor where applicable
  • Details of past warehouse licences, if any
  • Description of proposed manufacturing/other operations and the goods involved
  • Security arrangements – CCTV coverage, fire-fighting systems, alarms, manpower security arrangements

Mandatory declarations generally cover:

  • Registration/incorporation status in India
  • Solvency and non-bankruptcy representation
  • No conviction for offences under Customs Act, 1962, Central Excise Act, 1944, Finance Act, 1994, CGST Act, 2017, IGST Act, 2017
  • No ongoing criminal/bankruptcy proceedings

Undertakings usually include:

  • Maintaining digital accounts of receipts and removals in prescribed format and furnishing monthly to the bond officer.
  • Execution of bond as prescribed under Section 59.
  • Communication of input-output norms and any subsequent modifications.
  • Adherence to all conditions specified by the Principal Commissioner/Commissioner of Customs (see Circular 34/2019, Annexure-A).

4.3 Filing the Application

  • Prior to 15.10.2025: Applications are filed before the jurisdictional Principal Commissioner/Commissioner of Customs in the prescribed physical format.
  • From 15.10.2025 onwards: As per Circular 28/2025 dated 25.11.2025, licence applications under Section 65 must be filed online via ICEGATE 2.0.

4.4 Verification and Site Inspection

Upon receipt of the application:

  1. The system routes it to the officer linked to the port code chosen by the assessee.
  2. The jurisdictional officer may coordinate with DGFT and DRI for background and risk checks.
  3. Physical inspection typically examines:
    • Suitability and structural integrity of premises
    • Security and access control mechanisms
    • Storage/handling capacity and process flow