Manufacturers importing capital goods or inputs usually land on one of three routes to manage customs duty: the Manufacture and Other Operations in Warehouse Regulations (MooWR) scheme, the Export Promotion Capital Goods (EPCG) scheme, or the Advance Authorisation (AA) Scheme. AA and EPCG are duty exemption schemes, whereas MOOWR is a duty deferment scheme. None of them works the same way, and picking the wrong one can mean either an unnecessary export obligation or a missed duty deferment benefit.
This article lays out how the three compare, so you can narrow down which one fits your import and your business model, before you get into the paperwork of any one of them.
The Core Difference: Deferment vs Exemption-with-Obligation
The simplest way to separate the three is by what they ask of you in return.
MooWR defers duty on imported capital goods and inputs used in a bonded manufacturing warehouse. There is no export obligation. Customs duty is payable only if the imported goods or the goods resulting from such operations are cleared for home consumption; where such goods are exported, the deferred import duty is fully remitted (as per the FAQ on MOOWR).
EPCG exempts customs duty on imported capital goods upfront, in exchange for an export obligation. A commitment to export goods or services worth the prescribed multiple of the duty saved within the prescribed Export Obligation Period is also required, and you must maintain normal past export levels (Average Export Obligation).
Advance Authorisation provides duty exemption on imported inputs (raw materials, components) used in the manufacture of export products. In return, the authorisation holder must fulfil the prescribed export obligation within the applicable Export Obligation Period and comply with the applicable input-output norms and value addition requirements. Unlike EPCG, the scheme applies to inputs such as raw materials and components rather than capital goods.
MooWR at a Glance
- What it covers: Imported capital goods and inputs used for manufacture and other operations within a licensed bonded warehouse
- Duty treatment: Deferred on import; payable only upon clearance for home consumption (ex-bond clearance); the deferred import duty is fully remitted where the goods resulting from such operations are exported
- Export obligation: No export obligation under the MooWR scheme
- Best suited to: Manufacturers who want duty deferment, either don't know how much they will export or don't want a fixed Export Obligation (EO) like under schemes such as EPCG and Advance Authorisation, and are ready to pay the deferred duty if resultant goods are cleared domestically
- Trade-off: Ongoing compliance under Section 58 (private bonded warehouse licence) and Section 65 permission — a triple-duty bond under Section 59, digital accounts of receipt, processing, and removal maintained per Annexure B, a monthly return furnished to the bond officer, and security/access-control safeguards (CCTV, boundary controls, security personnel) at the premises as required under Regulation 8 of MOOWR, 2019 — for as long as the licence and permission remain in force
- Interest on "as such" clearance: Imported goods cleared "as such" (unprocessed) for home consumption attract import duties along with interest. If cleared "as such" for export, no duty or interest applies. This may vary from case to case
EPCG at a Glance
- What it covers: Import or indigenous procurement of capital goods for pre-production, production, and post-production, including eligible spares, moulds, dies, jigs, fixtures, tools, refractories, catalysts, and computer systems/software forming part of such capital goods
- What it doesn't cover: Capital goods listed in the negative list under Appendix 5F are not allowed under the scheme
- Duty treatment: Under the EPCG scheme, capital goods attract zero customs duty, and IGST and Compensation Cess are also exempt for physical exports
- Export obligation: Yes — you must export 6 times the duty, taxes, and cess saved within 6 years (half by year 4, the rest by year 6, with a 2-year extension available for a fee), and also keep up the Average Export Obligation based on your past 3 years' exports. The scheme closes once you get your EODC
- Best suited to: Exporters looking to import or domestically procure capital goods, along with confidently fulfilling a Specific Export Obligation (SEO) equal to 6 times the duty, taxes, and cess saved, and the Average Export Obligation (AEO), where applicable
- Trade-off: The export obligation has to be planned, monitored, and discharged; falling short can trigger proportionate duty plus interest
Advance Authorisation at a Glance
- What it covers: Inputs physically incorporated in the export product (with wastage allowance), plus fuel, oil, and catalyst consumed in production, and mandatory spares up to 10% of CIF value
- Duty treatment: No Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, or Safeguard Duty on covered inputs. IGST and Compensation Cess are also fully exempt — for both physical and deemed exports. One exception: certain deemed-export categories don't qualify for the full exemption, so it's worth confirming before you plan around it
- Export obligation: Yes. You've got 18 months from issue of authorisation to export, extendable by two further 6-month extensions (fees apply, capped at 12 months total). Defence, aerospace, and nuclear players get 24 months. You'll also need at least 15% value addition. A few sensitive inputs — spices, tea, silk, precious metals, and others — run on shorter clocks under Appendix 4J, with extensions capped at half of the stipulated period. Worth taking guidance from a trade advisory team here
- Best suited to: Exporters who want to import inputs duty-free, can achieve at least 15% value addition, and are confident they can fulfil the export obligation within the stipulated period — and are ready to pay duty, interest, and penalties if it isn't fulfilled
- Trade-off: The duty savings aren't free — you need to complete the export obligation, hit the minimum value addition, and keep input records matching exactly across the authorisation, shipping bill, and bill of entry. Imported inputs stay non-transferable throughout, so you can only freely dispose of the finished product once the export obligation is completed. Records need to be preserved well after closure for audit, and falling short means duty, interest, and penalties — worth taking guidance from a trade advisory team to stay on the right side of it
Comparison at a Glance
| MooWR | EPCG | Advance Authorisation | |
|---|---|---|---|
| Covers | Capital goods + inputs | Capital goods | Inputs physically incorporated in the export product — plus fuel, oil, and catalysts consumed in production |
| Duty treatment | Deferred, forgone on exports | Zero customs duty | Nil upfront |
| Export obligation | None | Yes — 6x duty saved (SEO) within 6 years (extendable), plus AEO where applicable | Yes, per input-output norms |
| Domestic sales allowed | Yes — deferred duty becomes payable, and GST also applies | Generally yes, doesn't affect EO directly | Not typically, since AA is tied to specific export production, but the resultant product can be sold domestically after fulfilling the export obligation |
| Ongoing compliance | Warehouse records, periodic returns; bond, digital accounts (Annexure B), monthly return, premises security (Regulation 8) | EO tracking, EODC closure | Norm-wise consumption tracking, EODC closure |
Scroll left to see the full table
Which Route Fits Your Business?
Manufacturers who want customs duty deferment, aren't sure how much they'll export, or don't want a fixed Export Obligation (EO), and are okay paying the deferred customs duty if the resultant goods get cleared for home consumption — as long as they're ready to take on the bond, warehouse record-keeping, and compliance that come with it — should go for MooWR.
If you're looking to import or domestically procure capital goods with the benefit of duty exemption, to improve your production capabilities and enhance your manufacturing competitiveness, and are confident of fulfilling the prescribed Export Obligation, go for EPCG.
Exporters who want to import inputs duty-free, can achieve at least 15% value addition, and are confident they can fulfil the export obligation within the stipulated period — and are ready to pay duty, interest, and penalties if it isn't fulfilled, and can meet the other requirements of the scheme — should go for AA.
It's also worth knowing these routes aren't always mutually exclusive across a business's different import lines — a manufacturer might use MooWR for one part of its operation and EPCG for a separate capital-goods investment. Whether that combination works for your specific structure is a question worth putting to KIREETI GROUP before you commit to any one licence.
