This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our PRIVACY POLICY for more information on the cookies we use and how to delete or block them.

Indirect Tax Alert - Amendment to the Customs Act, overhauling MOOWR scheme

07 April 2023

MOOWR Scheme

The proposed amendment to the Customs Act

  • A new section 65A has been introduced in the Customs Act, 1962 (Customs Act) (vide Section 130 of the Finance Act, 2023) to provide that IGST and Compensation Cess would be payable on imported goods deposited in the Customs warehouse for carrying out manufacture and other operations (under section 65), as opposed to the current facility of complete exemption from all elements of customs duty.
  • The new section 65A also prescribes various other conditions subject to which, the dutiable goods would be permitted to be deposited in the warehouse, some of which are as follows:
    • In respect of such goods, a Bill of Entry for Home Consumption has been filed under section 46 of the Customs Act;
    • Such goods have been assessed under section 17 or 18 of the Customs Act;
    • On removal of such goods from another warehouse, a bill of entry for home consumption under section 68(a) is presented and the applicable IGST and GST Compensation Cess is paid before the goods are so removed from such other warehouse;
  • This amendment will not apply to goods which have already been deposited or permitted to be removed for deposit in the Customs warehouses before the new section 65A of the Customs Act comes into force. Further, the government may exempt goods from the application of section 65A, subject to conditions which may be prescribed.
  • Consequential amendments have also been made to the provisions of sections 65, 157 and 159 of the Customs Act.
  • It is however very important to note that the effective date of the aforesaid amendment has not yet been notified till date.

BDO in India Comments

The proposed amendment will lead to various operational and legal issues for the industry. At the time of the introduction of the amended MOOWR scheme, it was provided that the scheme would provide a duty deferment option for entire customs duties (including Integrated Tax and GST Compensation Cess), and if it amended provision is given effect as such, it may take away the sheen out of the MOOWR scheme.

It would pose various challenges including -

  • The warehouses under MOOWR are private warehouses notified under section 58 of the Customs Act. The aforesaid amendment seeks to create an artificial distinction between the warehouses (notified for carrying out operations under section 65 of the Customs Act) vis-à-vis other private licensed warehouses (under section 58 of the Customs Act);
  • The proposed amendment also will result in two separate kinds of Bills of Entry for Home Consumption, viz., where all duties have been paid and where only IGST and GST Compensation Cess have been paid. Concerning the second class of Bills of Entry for Home Consumption, the mechanism for payment of the outstanding customs duties has not been stipulated. This creates a hybrid situation i.e., where the imported goods are treated as warehoused goods for the purpose of payment of basic customs duty (even after filing the bill of entry for home consumption) and cleared for home consumption, as far as IGST and GST Compensation Cess are concerned;
  • In addition to the above, given that the taxpayers would be liable to discharge IGST and GST Compensation Cess on imported goods, the benefit of duty deferment would be substantially curtailed. The taxpayers may be compelled to revalidate the feasibility and merit in the continuation under the MOOWR scheme;
  • There can be a situation of having two different relevant dates for the issuance of SCN, for any reason subsequently;
  • The industry would also need to assess the impact of the proposed amendment in section 17 of the CGST Act, 2017 where the common credits relating to supplies of warehoused goods are made as a subject of reversal.


[Amendments under sections 129, 130, 132 and 133 of the Finance Act, 2023]