The Indian government slashed the windfall tax on petroleum crude on Friday. Issuing an official notification, the Centre reduced the tax on petroleum crude from Rs 5,700 per metric tonne to Rs 5,200 per metric tonne (MT).
The revised tax rates will be effective from June 1, 2024, reported Reuters. The tax on diesel and aviation turbine fuel (ATF) remained unchanged at zero. Notably, the windfall tax is revised every fortnight by the authorities.
This marked the third time in May that the authorities cut down on the windfall tax on petroleum. Earlier on May 16, the tax on petroleum was slashed from Rs 8,400 per MT to Rs 5,700 per MT. Previously on May 1, 2024, the windfall tax was further decreased from Rs 9,600 per MT to Rs 8,400 per MT.
The windfall tax policy targets discouraging private refiners from focusing on exports before seeing to the domestic market supply. The policy was brought in around July 2022 to gain from the refining margins of the private players who preferred selling their product globally instead of locally. It was later expanded to include gasoline, diesel, and aviation fuel in its purview.
The need for the tax emerged as oil producing firms saw major profits flowing in amidst surging crude oil prices in 2022 driven by geopolitical circumstances such as Russia invading Ukraine.
Generally, the windfall tax is activated when global benchmark prices of the fuel cross $75 per barrel for domestic crude oil. Similarly, the tax on diesel, ATF, petrol is applied if the product margins surpass $20 per barrel.
This tax is imposed in the form of Special Additional Excise Duty (SAED), while the official notification indicated that the SAED for diesel and aviation fuel remained at zero.
On Friday, the global oil benchmark, Brent crude, dipped 0.44 per cent to touch $81.50 per barrel.
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