Here's how to import capital goods to India inexpensively with the MOOWR scheme

European companies operating or wanting to start production in India can use the MOOWR scheme to import (capital) goods to India in a smart and cheaper way. The scheme offers foreign companies the chance to invest in cutting-edge technology, allowing them to optimize their production processes in India and aims to modernize domestic industries. Here's how you, as a European company, can source smart by taking advantage of the MOOWR scheme.

By importing (capital) goods and under the MOOWR scheme European companies can benefit from low import duties and other incentives, making it an attractive way to expand and modernize your manufacturing operations in India.

Read more here about what exactly the MOOWR scheme is and what benefits it offers European companies.

Tax benefits of the MOOWR scheme.

If you use the MOOWR scheme, European companies get a deferral on paying import duties until the goods are cleared for domestic use or export to a subsequent location. The customs process is also relaxed, which means fewer documentation requirements, fewer physical inspections and faster clearance of products. This, of course, reduces administrative and operational costs.

But what makes the scheme especially attractive is the range of goods that can be imported advantageously under the scheme.

Economical sourcing under MOOWR

MOOWR may seem to focus on sourcing capital goods, but the scheme is much broader. Companies can economically source all elements needed for more efficient production, including raw materials, components and intermediate goods.

In addition, the MOOWR scheme also promotes cooperation between foreign companies and Indian suppliers. This cooperation not only facilitates technology transfer and knowledge sharing, but also strengthens the overall ecosystem by stimulating local industries and creating jobs.

Roadmap for sourcing through the MOOWR program

1. Find a suitable bonded warehouse
Find a bonded warehouse that meets your company's needs in terms of location, size and facilities. Consider both government-run and privately-run bonded warehouses in India.

2. Build a relationship with a bonded warehouse
Enter into a formal agreement with the warehouse operator. Obtain necessary licenses and approvals from relevant authorities.

3. Import capital goods
Purchase capital goods from both Indian and international suppliers. Import these goods into bonded warehouse and clear them under MOOWR scheme.

4. Manufacturing and other activities
Manufacture, process, pack and test goods in bonded warehouse. Store goods safely until ready for clearance.

5. Clear goods for domestic consumption or export
If the goods are ready for domestic consumption or export, apply for clearance. Pay deferred import duties at this stage.

Also take advantage of the MOOWR scheme

European companies looking to set up production in India should look into the benefits the MOOWR rulein offers them to get started and to import capital goods in a cost-effective manner.

Curious about the details of the program and how your company too could use this scheme in a smart way?

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Shashank Verma

Vice President of Supply Chain Management

This article was written in collaboration with vice president of Supply Chain Management, Shashank Verma.

Verma has over 22 years of experience in establishing business strategies, managing the supply chain of hundreds of European companies, establishing sound logistics in India and other related functions with a focus on revenue growth and profit maximization of organizations.

MOOWR scheme: tax breaks for European companies looking to produce in India

The Manufacturing or Other Operations in Warehouse Regulations (MOOWR) is a comprehensive set of guidelines published by the Indian government to encourage foreign investment in the country. These regulations offer several benefits to international companies looking to establish manufacturing or assembly units in India. In this article, we list the main benefits of the MOOWR program for European companies.

Easier access to the Indian market

The MOOWR scheme can be an attractive option for international companies looking to enter the Indian market. It gives international companies the option of setting up manufacturing facilities in India in a straightforward manner, reducing their reliance on importing products or semi-finished goods and taking immediate advantage of the many favorable tax schemes available to international companies manufacturing in the country.

Deferral of payment of import duties

Under the MOOWR scheme, international companies can import raw materials, semi-finished and (capital) goods without paying import duties in advance. Import duties need not be paid until the finished goods are exported or sold domestically. The deferred payment of import duties can significantly reduce the initial capital costs for international companies, allowing them to invest more in their production activities during this initial phase.

Streamlined customs procedures

The MOOWR program simplifies customs procedures for importing goods into India for manufacturing or assembly purposes. Fewer documentation requirements apply, fewer physical inspections are required, and products have a faster clearance time. The simplified rules also allow international companies to reduce their administrative burden and operational costs.

Produce quickly and easily

Under the MOOWR scheme, international companies can carry out a wide range of manufacturing and other activities within bonded warehouses, including assembly, processing, packaging and testing. This means that there is no need to set up their own factory immediately, as the scheme allows international companies to lease or rent production sites within existing bonded warehouses or to set up their own bonded warehouse within the existing premises. This flexibility provides European companies with more control over their production processes because they do not necessarily have to outsource to a third party.

Exporting without barriers

MOOWR, unlike other schemes, does not impose specific export obligations when imports are made by the European company to India. This gives international companies more flexibility in their export plans and the ability to target markets where they see the greatest potential for growth and profitability. India's strategic location provides European companies with access not only to Asia, but also to Oceania. By establishing themselves in India through the MOOWR scheme, European companies can expand their reach and tap into new markets.

Find out here how you too can export capital goods to India advantageously under the MOOWR scheme to make your production processes more efficient.

Working together to grow faster in the Indian market

The MOOWR program promotes cooperation between European and Indian companies and creates opportunities for joint ventures, partnerships and knowledge sharing. European companies can benefit from the expertise, market knowledge and local networks of Indian companies, facilitating market entry and long-term expansion. Working together, European companies can gain a better understanding of Indian consumer preferences, cultural nuances and business practices so they can tailor their products and services accordingly.

India is one of the fastest growing economies in the world, and the MOOWR program provides a relatively easy way for European companies to take their first steps into the dynamic Indian market. The MOOWR scheme is attractive to all European companies wishing to set up manufacturing operations in India. Are you curious about the specific benefits for your sector or company?

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Shashank Verma

Vice President of Supply Chain Management

This article was written in collaboration with vice president of Supply Chain Management, Shashank Verma.

Verma has over 22 years of experience in establishing business strategies, managing the supply chain of hundreds of European companies, establishing sound logistics in India and other related functions with a focus on revenue growth and profit maximization of organizations.

Merchant Trading: export directly from your Indian factory and avoid double import duties

India is becoming a very popular manufacturing location for European companies because of its large talent pool of highly skilled workers, low costs, excellent knowledge of the latest technology and strategic location. This makes India not only a great manufacturing hub, but also the perfect home base from where the region can be easily supplied. More and more European companies are therefore choosing India as a manufacturing location to export their products to neighboring countries.

If you use India as a regional manufacturing hub, you naturally want to be able to export your products directly from the factory, rather than having to send them to your European headquarters first. This direct way of exporting is called merchant trading. In this article, we explain how merchant trading from India works and how to get the right permits.

Merchant Trading as a European company

Merchant Trading means that a shipment of goods takes place from one foreign country to another foreign country through an "intermediary" or "merchant" in a third country and without entering or leaving the merchant's country. Merchant trading thus helps companies avoid paying double import duties.

Let's simplify this with an example. A Dutch company has a subsidiary in India that manufactures its products. The Dutch company has found a Singaporean customer who wants to buy the products manufactured in India. Instead of importing the products to the Netherlands and then exporting them to Singapore, the Dutch company asks the Indian subsidiary to deliver the products directly to the buyer in Singapore. This means the products never enter or leave the Netherlands.

In this case, we speak of merchant trading because:
- the supplier of the goods to be exported is the subsidiary in India;
- the buyer of the goods to be exported is the customer in Singapore;
- the merchant or intermediary is the parent company in the Netherlands.

But we speak of merchant trading not only when a subsidiary is involved, but also when a company purchases the products it will ship to the customer from a third party.

For example, the Dutch company receives an order from a customer in the US for a specific product that it does not produce itself from a customer in the US. The Dutch company places an order with a supplier in India who manufactures the product and asks the Indian supplier to ship the goods directly to the customer in the US. Again, the goods do not enter or leave the Netherlands, so again in this example the Dutch company is the merchant trader.

In this example, the Indian supplier sends its invoice to the Dutch company, which then sends its own invoice to the American customer. In the example where the goods are delivered by the Indian subsidiary, the international and local transfer pricing rules apply to the sale of the goods from the Indian subsidiary to the Dutch parent company.

Paying GST (VAT) on a Merchant Trade

According to the IGST Act delivery to a location outside India by an Indian supplier is treated as delivery of goods between two Indian states. In the CGST Act states that activities or transactions are not treated as a supply of goods if the goods are delivered from one place in a non-taxable territory to another place in a non-taxable territory without the goods entering India.

This means that in our examples, where the goods are supplied from India, the IGST Act applies and GST is payable. In the case where the trader is the Indian company, the CGST Act applies and no GST is due either.

Required documents for Merchant Trading from India.

The documents needed to ship goods from the supplier to the customer depend on the specific products being sold and whether the Indian company is the supplier or the merchant in the deal. If the latter, at least 13 documents must be submitted to enable the Merchant Trade. It is therefore strongly recommended to work with a local expert in this field, who can advise you on how best to set up the merchant trade and support you in obtaining all the necessary documentation.

Our experts are available to answer all your questions on this topic and to help you successfully complete your first merchant trade.

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Shashank Verma

Vice President of Supply Chain Management

This article was written in collaboration with vice president of Supply Chain Management, Shashank Verma.

Verma has over 22 years of experience in establishing business strategies, managing the supply chain of hundreds of European companies, establishing sound logistics in India and other related functions with a focus on revenue growth and profit maximization of organizations.