Industry bodies have sought depreciation benefits on imported machinery under the MOOWR scheme and eligibility for RoDTEP, arguing that the current framework raises costs for manufacturers. According to reports from Business Standard, they have argued that when such machinery is eventually sold or cleared for domestic use after years of operation, customs duty should be levied on its reduced value after accounting for wear and tear, rather than on its original import value.
The industry bodies have also sought eligibility under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which refunds taxes and duties that remain built into the cost of exported goods. As reported by Business Standard, they have contended that since MOOWR is only a duty-deferment mechanism and not a duty-exemption scheme, units operating under it should not be denied RoDTEP benefits. Exporters continue to incur embedded taxes in the value chain despite operating under MOOWR, and denying remission merely because goods are manufactured in bonded warehouses runs contrary to the objective of improving export competitiveness.
According to Suresh Nair, partner at EY, the demand for depreciation benefits is both logical and equitable, as it aligns customs valuation with the commercial reality that machinery loses value over time. As reported by Business Standard, levying duty on the depreciated value would also remove a key disincentive for manufacturers using the MOOWR scheme. The MOOWR scheme is fundamentally a duty-deferment mechanism and not a duty-exemption scheme, and consequently, levying customs duty on the original import value when used capital goods are eventually cleared, without accounting for depreciation, ignores the commercial reality of diminished asset value and may result in an arbitrary tax incidence.
Abhishek A Rastogi, founder of Rastogi Chambers, said the industry's demands are rooted not only in commercial considerations but also in principles of legal consistency. According to Business Standard, excluding exporters solely because they operate under the MOOWR framework could undermine the objective of ensuring exports remain free from embedded domestic taxes. The current framework creates an arbitrary tax incidence that contradicts the fundamental principle of ensuring exports remain competitive in the global market.
