Most Indian manufacturers who import pay customs duty at the port, months before the finished goods are sold. That money sits inside the factory as working capital nobody counts — and for a great many of them, it does not have to.
Manufacturing in a bonded warehouse under Section 65 of the Customs Act, commonly called MOOWR, allows duty on imported inputs and capital goods to be deferred until the goods leave the warehouse. If they leave as exports, the duty is not paid at all.
What makes it different from the schemes you already know
| Scheme | Export obligation | Duty treatment |
|---|---|---|
| Advance Authorisation | Yes, with a defined period | Exemption on inputs, against obligation |
| EPCG | Yes, on capital goods | Exemption, against export obligation |
| SEZ / EOU | Net foreign exchange and location conditions | Exemption, with conditions |
| MOOWR (Section 65) | None | Deferment; waiver if exported |
That third column is the point, but the second column is the reason it suits companies the others do not. There is no export obligation. You may import, manufacture, and sell the entire output in India — you simply pay the duty when the goods clear into the domestic market.
That makes MOOWR available to a manufacturer with no export plans at all, which none of the other schemes are.
What it is actually worth
Two distinct benefits, and they behave differently.
On capital goods: deferment that can run for years
Import machinery into the bonded facility and no duty is payable on arrival. Duty becomes payable only if and when the capital goods are cleared into the domestic market — and if you keep using them in the facility, that may be a very long time, or never. Where the output is exported, the question does not arise.
For a plant setting up a new line, this is the difference between finding the duty on day one and finding it much later, if at all.
On inputs: a working capital release that recurs
Duty on imported raw materials is deferred until the finished goods are cleared domestically. In a business where input lands, sits, is processed and is then sold over a cycle of months, your money stays with the government for that whole period today — and under MOOWR it is not.
How to size it for your own business, roughly. Take your annual imported input value, apply your effective basic customs duty rate, and multiply by the fraction of the year the average consignment sits before sale. That is how much of your money stays blocked at all times. Then apply your borrowing rate to it — that is what the deferment is worth every year, before you count the capital goods benefit at all.
What it demands of you
MOOWR is not paperwork-light, and companies that treat it as a registration rather than an operating discipline get into trouble. The obligations are real:
- A licensed private bonded warehouse, with the premises approved and physical security and access conditions met.
- A warehouse keeper and an executed bond with the department.
- Digital records of receipt, consumption, manufacture and removal — traceable from the bill of entry to the finished goods that left.
- Monthly returns to the jurisdictional Commissioner.
- Input-output accounting that holds up. This is the real obligation. You must be able to demonstrate what went into what, including waste and scrap.
The last one decides whether the scheme works for you. If your production records already tie consumption to output, MOOWR is an administrative addition. If they do not — if consumption is inferred at month-end rather than recorded — you have a process project before you have a customs project.
The amendment you must factor in
Section 65A was introduced into the Customs Act in 2023. Once notified, it changes the position on IGST: integrated tax and compensation cess would become payable on goods deposited into the warehouse, leaving Section 65 to defer basic customs duty alone.
As matters stand it has not been notified, and the current position continues. The amendment also carries a transition provision protecting goods already deposited, or permitted for deposit, before it comes into force.
Two practical conclusions follow. First, any assessment of what MOOWR is worth to you should be run twice — once on the law as it stands, and once assuming Section 65A is notified — so the decision holds either way. Second, for most manufacturers the basic customs duty deferment on capital goods survives the amendment intact, and for many companies that benefit alone is enough to justify it.
We scope every engagement on the law as it stands on the date of signing, and tell you what changes if it is notified. Anyone presenting the IGST benefit as permanent is not reading the statute.
Who this genuinely suits
- Import-dependent manufacturers where imported inputs are a material share of cost.
- Companies investing in new capital equipment — the capital goods deferment is the cleanest benefit in the scheme.
- Mixed domestic and export manufacturers, who cannot commit to the export obligations that Advance Authorisation or EPCG require.
- Contract manufacturers with long production cycles, where inputs sit for months.
Who it suits less: businesses with negligible imported content, very short cycles, or record-keeping that could not withstand a reconciliation between a bill of entry and a dispatch note.
The honest summary
MOOWR is not a subsidy and it is not free money. It is the government agreeing not to take your cash until you have actually made a sale — which, for a manufacturer carrying imported inventory through a long cycle, is one of the largest single releases of working capital available under Indian law.
The work is in the records, not the application. Companies that already run tight production accounting find the case makes itself.