The Indian government reduced the windfall tax on petroleum crude to Rs 1,850 per metric tonne, down by 11.9 per cent from Rs 2,100 per metric tonne. The new rates will be effective from August 31, 2024. Earlier this month, the authorities cut down the special additional excise duty (SAED) or windfall tax by 54.3 per cent from Rs 4,600 per tonne.
The central government also announced that it is maintaining the windfall tax on diesel and aviation turbine fuel (ATF) exports at zero. This tax was originally introduced by the authorities in July 2022.
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This decision to impose the tax was motivated by the private refiner’s preference to sell fuel overseas to capitalise on the increased refining margins instead of selling the product domestically and prioritise the market supply within the borders.
Typically, the government revises the windfall tax every fortnight on the basis of fluctuations in international crude and product prices. Windfall taxes are levied on an industry when it records exceptionally high profits, often owing to unexpected variables.
Oil prices declined on Friday marking a week of fall, due to worries about excess supply in the market from OPEC+, meanwhile, prices remained affected due to output disruptions in Libya.
These taxes are meant to curb the elevated profits of the oil-producing firms. Notably, geopolitical events such as Russia’s invasion of Ukraine leave a lasting impact on crude prices.
The windfall tax helps make sure that the domestic refining industry adds to the country’s economic growth and stabilises the availability of fuel in the market. It is also intended to keep a check on the prices of the fuel in the domestic market. Through these taxes, the authorities try to keep a balance between the nation’s economic interests and the fiscal health of the energy players in the market.
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