The government on Thursday cut the windfall tax on crude oil to Rs 4,900 ($60.34) per tonne. It also cut the export tax on diesel by Rs 6.5 per litre. Changes to the windfall tax will be effective from Friday, according to a government order.
News agency ANI tweeted saying that the Centre has cut windfall tax on domestic crude oil.
The windfall tax is a special tax imposed by a government on a company or industry when it benefits from something but not responsible for the financial gain that ensues is called windfall profits.
India first imposed windfall profit tax on July 1, joining a growing number of nations that taxed super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.
At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and aviation turbine fuel and Rs 13 a litre ($26 a barrel) on diesel. A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.
Producers, including state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta-controlled Cairn, were impacted by the windfall tax on domestic crude.
ONGC had urged the government to withdraw profit tax on domestically produced crude oil and instead use the dividend route to tap into the bumper earnings resulting from a surge in global energy prices, reported by PTI earlier.
However, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri had said that windfall tax was under the purview of the finance ministry and the ministry would continue to review it at every fortnight.
Meanwhile, former Revenue Secretary Tarun Bajaj said that windfall gains tax, which is imposed on crude petroleum exports, will be slashed or scrapped as the global oil prices decelerate. "As the prices come down, the windfall taxes will either reduce or go away," he said.