FAQ Manufacture and Other Operations in Customs Warehouse
                     Frequently Asked Questions
Manufacture and Other Operations 
in Customs Warehouse 
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• Central Board of Indirect Taxes and Customs (CBIC) has launched a revamped 
and streamlined program to attract investments into India and strengthen Make 
in India. This program is based upon Section 65 of the Customs Act, 1962, which 
enables conduct of manufacture and other operations in a Customs bonded 
warehouse. The program has been introduced vide the Manufacture and Other 
Operations in Warehouse (no. 2) Regulations, 2019, (hereinafter referred to as 
MOOWR, 2019) and explained through Circular-34/2019-Customs dated 01st 
October, 2019. 
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• Under this program a unit can import goods (both inputs and capital goods) 
under customs duty deferment with no interest liability. There is no investment 
threshold or export obligation. The duties are fully remitted if the goods 
resulting from such operations are exported. Import duty is payable only if the 
resulting goods or imported goods are cleared in the domestic market (ex-
bonding). The salient features of the program are: 
i. No geographical limitation on where such units can be set up. 
ii. A single application cum approval form for uniformity of practice with a single 
point of approval to set up the operations of such units. 
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iii. Improved liquidity with deferment of import duty and no interest liability. 
iv. Allows procurement of GST compliant goods from the domestic market for use 
in manufacture and other operations in a Section 65 unit. 
v. A single digital account for ease of doing business and easy compliance. 
vi. Enables efficient capacity utilization, as there is no limit on quantum of 
clearances that can be exported or cleared to the domestic market. 
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1. Who is eligible for applying for manufacture and other operations in a   
bonded warehouse?
R esponse: The following persons are eligible to apply for manufacture and other 
operations in a bonded warehouse, - 
i. A person who has been granted a licence for a warehouse under Section 58 of 
the Customs Act, in accordance with Private Warehouse Licensing Regulations, 
2016.
ii. A person can also make a combined application for licence for a warehouse 
under Section 58, along with permission for undertaking manufacturing or 
other operations in the warehouse under Section 65 of the Act. 
The persons mentioned have to be a citizen of India or an entity incorporated              
  or registered in India.  
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2. Can a factory which is solely into manufacturing goods, which are to be 
sold in the domestic market, eligible for applying for manufacture and 
other operations in a bonded warehouse? 
Response: The eligibility of a factory for manufacture and other operations in a 
bonded warehouse does not depend upon whether the final goods will be sold 
in the domestic market or exported. There is no quantitative restriction on sale 
of finished goods in the domestic market. Any factory can avail a license under 
Section 58 of the Customs Act along with a permission under Section 65 if they 
intend to import goods without upfront payment of Customs duty at point of 
import and deposit them in the warehouse, either as capital goods or as inputs 
for further processing.
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3. Is an existing factory which solely manufactured goods to be sold in the 
domestic market, eligible for application for manufacture and other 
operations in a bonded warehouse? How will the existing capital goods 
and inputs be accounted? 
Response: Yes. Any unit in Domestic Tariff Area (DTA) is eligible for making an 
application for manufacture and other operations in a bonded warehouse i.e. an 
old factory in DTA is eligible for applying. 
The accounting form prescribed for the units undertaking manufacture and 
other operations in a bonded warehouse provides for accounting of DTA 
receipts. Thus the existing capital goods and inputs must be accounted in the 
accounting form prescribed. The form also provides for a remarks column in 
case certain remarks are to be entered. 
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4. Is manufacture and other operations in a bonded warehouse allowed in 
Public Bonded Warehouse licensed under Section 57 of the Customs Act? 
Response: No. At present, manufacture and other operations in a bonded 
warehouse is allowed only in a Private Bonded Warehouse licensed under 
Section 58 of the Customs Act.
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5. Will a unit licensed under Section 65 and Section 58 of the Customs Act, 
1962, be under the physical control of Customs?
Response: No. There is no physical control of a unit licensed under Section 65 and 
Section 58 of the Customs Act, 1962, on a day to day basis. The unit will be 
subject to risk based audits.
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6. Can the license under Section 65 and Section 58 of the Customs Act, 1962, 
be obtained on bare land with identified boundaries or a built structure 
is imperative for obtaining the said license? 
Response: The regulations do not mandate that a fully enclosed structure is a pre-
requisite for grant of license. What is important is that the site or building is 
suitable for secure storage of goods and discharge of compliances, such as 
proper boundary walls, gate(s) with access control and personnel to safeguard 
the premises. Moreover, depending on the nature of goods used, the operations 
and the industry, some units may operate without fully closed structures. The 
Principal Commissioner/Commissioners of Customs will take into consideration 
the nature of premises, the facilities, equipment and personnel put in place for 
secure storage of goods, while considering grant of license.
 
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7. Do we need to renew license under Section 58 or permission under 
Section 65? 
Response: The license and permission granted is valid unless it is cancelled or 
surrendered, or the license issued under Section 58 is cancelled or surrendered. 
Thus no renewal of the license under Section 58 or permission under Section 65 
is required.
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8. Can a unit undertaking manufacture and other operations in a bonded 
warehouse import capital goods without payment of duty? If yes, whether 
only BCD or both BCD and IGST on imports is covered? For how long is 
duty deferment available? Is interest payable after some time?
Response: A unit licensed under Sections 58 and 65 can import capital goods and 
warehouse them without payment of duty. Manufacture and other operations in a 
bonded warehouse is a duty deferment scheme. Thus both BCD and IGST on 
imports stand deferred. In the case of capital goods, the import duties (both BCD 
and IGST) stand deferred till they are cleared from the warehouse for home 
consumption or are exported. The capital goods can be cleared for home 
consumption as per Section 68 read with Section 61 of the Customs Act on payment 
of applicable duty without interest. The capital goods can also be exported after 
use, without payment of duty as per Section 69 of the Customs Act. The duty 
deferment is without any time limitation. 
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9. Would any customs duty be payable on the goods manufactured in the 
bonded premises using the imported capital goods (on which duty has 
been deferred) and sold into the domestic tariff area? 
Response: The payment of duty on the finished goods is clarified in Paras 8 and 9 
of the Circular No. 34/2019. Duty on the capital goods would be payable if the 
capital goods itself are cleared into the domestic market (home consumption). 
Thus the duty on the capital goods does not get incorporated on the finished 
goods. Thus no extra duty on finished goods cleared into DTA is payable on 
account of imported capital goods (on which duty has been deferred). 
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10. Can a unit undertaking manufacture and other operations in a bonded 
warehouse import inputs without payment of duty? If yes, whether only 
BCD or both BCD and IGST on imports is covered? For how long is duty 
deferment available? Is interest payable after some time?
 
Response: Manufacture and other operations in a bonded warehouse is a duty 
deferment scheme. Thus both BCD and IGST on imports stand deferred. In the 
case of goods other than capital goods, the import duties (both BCD and 
IGST) stand deferred till they are cleared from the warehouse for home 
consumption, and no interest is payable on duty. In case the finished goods are 
exported, the duty on the imported inputs (both BCD and IGST) stands remitted 
i.e. they will not be payable. The duty deferment is without any time limitation.
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11.  Is import of raw material without BCD and IGST allowed? Will there be 
any interest obligation if IGST is paid when finished goods are sold in 
domestic markets?
Response: Inputs/raw materials can be imported and deposited in the licensed 
warehouse without payment of BCD and IGST. No interest liability arises when 
the duties are paid at the time of ex-bonding the resultant goods. The duties 
(without any interest) are to be paid only when the resultant goods are being 
cleared for home consumption.
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12. Would it be mandatory to appoint a warehouse keeper in the factory 
licensed under Section 65 of the Customs Act? Would all goods cleared 
from the said factory be subject to inspection by the warehouse keeper/ 
Customs authorities?
Response: A warehouse keeper has to be appointed, for a premise to be licensed 
as a private warehouse under Section 58 of the Customs Act. The warehouse 
keeper is expected to discharge duties and responsibilities, maintain accounts 
and also sign the documents, on behalf of the licensee. The warehouse keeper is 
expected to supervise and satisfy himself about the veracity of the 
declaration/accounts that he is signing. The inspection of goods by customs at 
the stage of ex-bonding would be done, only if there is indication of risks and 
not as a matter of routine practice. Approval of the bond officer is not required 
for clearance of the goods from the warehouse.
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13. How frequently is an audit of a unit operating under Section 65 of 
Customs Act, 1962 expected? 
Response: The audit of units operating under Section 65 would also be based on 
risk criteria. There is no prescribed frequency for such audit.
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14. What is the customs document/ form for movement of imported goods on 
which duty has been deferred to/ from a unit undertaking manufacture 
and other operations in a bonded warehouse? Are such goods required to 
be under customs escort during their movement? 
Response: Following are the customs document for movement of imported goods 
on which duty has been deferred to/ from a unit undertaking manufacture and 
other operations in a bonded warehouse:
i.      Customs Station to Section 65 unit: Bill of entry for warehousing. It is 
clarified that no separate form is prescribed for movement from Customs 
station to Section 65 unit as the goods are already accompanied by the Bill of 
entry for warehousing. 
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ii. ii. From another warehouse (non-Section 65) to a Section 65 Unit: Form for 
transfer of goods from a warehouse as prescribed under the Warehoused 
Goods (Removal) Regulations, 2016. This is because warehouse which is not a 
Section 65 unit has to follow the Warehoused Goods (Removal) Regulations, 
2016. 
iii. From Section 65 Unit to another warehouse (the other warehouse can be a 
Section 65 unit or a non-Section 65 warehouse): Form prescribed in 
Manufacture and Other Operations in Warehouse (no. 2) Regulations, 2019.
        
        The goods will not be under customs escort during movement.
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15. If the imported capital goods are cleared for home consumption after 
use, is depreciation available? 
Response: No. Depreciation is not available if imported capital goods (on which 
duty has been deferred) are cleared for home consumption after use in a 
Section 65 unit.
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16. If the imported capital goods are cleared for export after use, is 
depreciation available? 
Response: The imported capital goods (on which duty has been deferred) after 
use in a Section 65 unit can be exported without payment of duty as per 
Section 69 of the Customs Act. For the purposes of valuation of the export 
goods, the same will be as per the Section 14 of the Customs Act read with the 
Customs Valuation (Determination of Value of Export Goods) Rules 2007.
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17. Can all export benefits under FTP and Customs (Import of Goods at 
Concessional Rate of Duty) Rules, 2017 (IGCR) be taken in Bonded 
warehouse simultaneously? 
Response: The eligibility to export benefits under FTP or IGCR would depend 
upon the respective scheme. If the scheme allows, unit operating under 
Section 65 has no impact on the eligibility. In other words, a unit operating 
under Section 65 can avail any other benefit, if the benefit scheme allows. 
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18. What will be the method of inventory control method in Section 65 units? 
Whether First in First Out (FIFO) method can be followed? 
Response: The Generally Accepted Accounting Principles will be followed for 
inventory control in a Section 65 unit. Thus FIFO method can be followed. 
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19.   What is the procedure and documentation requirements for re-entry of    
manufactured goods, returned by the customers for repair, in the 
premises? 
Response: Once the goods are cleared from the warehouse, they will no longer be 
treated as warehoused goods. Thus if the resultant goods cleared from the 
warehouse are returned by the customer for repair, they will be entered as DTA 
receipts (this is provided in the accounting form). After repair, when the same is 
cleared from the warehouse, the same will be entered in the prescribed 
accounting form. If the goods were exported and subsequently rejected or sent 
back for repair by the customer, then the goods upon re-import have to be 
entered as Imports receipts in the accounting form. The relevant customs 
notification for re-imports has to be followed while filing the Bill of Entry for re-
import of the goods. 
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20.  What is the procedure for surrender of licence for a Section 65 unit? 
Response: Since the unit operating under Section 65 is also licensed as a Private 
Bonded warehouse under Section 58 of the Customs Act, the procedure for 
surrender of licence will be as per the regulation 8 of the Private Warehouse 
Licensing Regulations, 2016. A licensee may therefore, surrender the licence 
granted to him by making a request in writing to the Principal Commissioner of 
Customs or Commissioner of Customs, as the case may be. On receipt of such 
request, the licence will be cancelled subject to payment of all dues and 
clearance of remaining goods in such warehouse. 
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