The government cut its windfall tax on petroleum crude to Rs 1,700 ($20.53) a tonne from Rs 2,300 a tonne, according to a official notification on Monday. The cut will be effective from January 16 (Tuesday), as per the order. On January 2, the government had lifted the windfall tax on petroleum crude oil to Rs 2,300 a tonne from Rs 1,300 a tonne.
From July 2022, the Centre imposed a windfall tax on crude oil producers, and extended the levy on exports of gasoline, diesel, and aviation fuel as private refiners wanted to sell fuel overseas to make gains from robust refining margins instead of selling locally.
The tax is levied in the form of Special Additional Excise Duty (SAED). According to an official notification, SAED on export of diesel, petrol and jet fuel or ATF has been retained at nil.
India imposed the windfall tax on crude oil producers in July 2022 and extended the levy on exports of gasoline, diesel and aviation fuel after private refiners wanted to make gains from robust refining margins in overseas markets, instead of selling at home. The Centre first imposed windfall profit taxes on July 1, 2022. This decision was prompted by significant profits earned by oil production companies, driven by multi-year high crude oil prices following Russia's invasion of Ukraine.
The reduction of windfall tax was mainly based on sofetening global oil rates since the last revision. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
Usually a windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF, and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.
Meanwhile, global oil benchmark Brent crude climbed 0.18 per cent to $78.29 a barrel.
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