The Government has provided various benefits to the importers such as concessional rates of import duty through exemptions, deferment of duty payment, etc. The CBIC received various representations regarding the applicability of the concessional rate of duty under IGCR for the MOOWR Scheme.
Concerning the same, the CBIC has issued detailed clarification vide Circular No. 26/2024 – Customs dated 21st November, 2024. A comprehensive review of such circular is shared in the article.
1. What is the Concessional rate of duty under IGCR Rules, 2022
- Import of Good at Concessional Rate of Duty Rules, 2022 were notified on 10th September, 2022.
- IGCR Rules allow the importer to import goods by paying customs duty at a concessional rate under exemption notification issued under Section 25(1) of the Customs Act, 1962.
- The exemption is based on the end use of the goods imported. The importer is required to utilize imported goods for the intended purpose only, based on which exemption is claimed, within the specified time.
2. What is Manufacture and Other Operations in Warehouse Regulations (MOOWR)
- MOOWR Scheme was introduced through Notification No. 44/2019-Customs (N.T) dated 19th June 2019.
- MOOWR scheme provides significant benefits to importers by allowing them to defer duty payments until the removal of goods.
- The importer is not required to make payment of customs duty on import till the goods are cleared for home consumption.
- It is pertinent to note that MOOWR is a duty deferment scheme and not a duty exemption scheme.
- The duty on imported capital goods and inputs stands is not required to be paid till the goods are cleared for home consumption from the warehouse.
- Where imported inputs are used for manufacturing in the bonded warehouse and finished goods are cleared to DTA, GST on finished goods along with import duties on imported inputs are payable.
- In case of export of capital goods or finished goods from warehouse. the duty on imported inputs stands remitted. Also, zero rating of tax on domestic inputs is allowed.
3. Clarification on simultaneous availment of Concessional rate of duty under IGCR and duty deferment under MOOWR
In this matter, the CBIC has clarified that:
- Representations are received to clarify whether a concessional rate of duty can be claimed under IGCR Rules for the warehoused goods taken for manufacturing with the duty deferment under MOOWR and being cleared to DTA or removed to SEZ or another MOOWR unit.
- CBIC has clarified that this issue has already been clarified through Question 17 of FAQs on MOOWR which is reproduced as follows:
“The eligibility to export benefits under FTP or IGCR would depend upon the respective scheme. If the scheme allows, units operating under Section 65 have no impact on the eligibility. In other words, a unit operating under Section 65 can avail of any other benefit, if the scheme allows”
- Therefore, the MOOWR unit may avail of exemption under IGCR Rules along with duty deferment under MOOWR. However, exemption under IGCR rules shall be available subject to compliance with conditions prescribed under IGCR Rules including time limit, etc., along with MOOWR stipulations.
4. Applicability of IGCR benefit in certain cases:
- Doubt has been raised about the availability of IGCR benefit for the import of certain goods that are to be used for value addition by way of manufacturing under MOOWR unit and such value-added goods are further supplied to the final manufacturer of cellular mobile phones.
- The matter is raised to Notification No. 57/2017 -Cus dated 30.06.2017 where in description of goods is mentioned including the expression “for use in manufacture of cellular mobile phones”.
- CBIC has clarified that CBIC Instruction 16/2024 – Customs dt. 25.06.2024 already clarifies the procedure to be adopted for the import of goods by a unit in compliance with the provisions of MOOWR and the transfer of resultant goods to another unit. Further, there is clear documentation involving transfer and periodical accounts by the MOOWR units.
- Therefore, the expression “for use in the manufacture of cellular mobile phones” is intended to convey that the component should be used in the manufacturing process for cellular mobile phones.
- However, the same does not mean that cellular mobile phone manufacturers should import the components. Therefore, the goods imported by any intermediate goods manufacturer who is MOOWR unit and such goods are further supplied to the final manufacturer of Cellular mobile phones after certain value addition are duly eligible for the benefit of concessional rate of duty under IGCR Rules, 2022, as long as all other conditions are met.
Conclusion
CBIC keeps on issuing clarifications to ensure smooth compliance for the industry. CBIC has clarified that the MOOWR Units are entitled to claim the concessional duty rate under IGCR Rules subject to compliance with the terms of conditions of both MOOWR provisions and IGCR Rules. The same position was also clarified earlier through FAQs. The MOOWR units must file necessary documents with the customs officer to claim the benefit of IGCR Rules.
