Government Reduces Windfall Tax On Domestic Crude, Tax On Diesel, Jet Fuel Exports Increased

The decision will see the windfall tax on crude petrol reduced from Rs 7,100 to Rs 6,700 per tonne and will come into effect from September 2.

The government reduced the special additional excise duty (SAED) on crude petroleum on Friday. The decision will see the windfall tax on crude petrol reduced from Rs 7,100 to Rs 6,700 per tonne and will come into effect from September 2, the finance ministry informed via a notification. 

The notification also stated that windfall tax on the export of diesel will be increased to Rs 6 per litre from Rs 5.50, reported PTI. The government has increased the duty on jet fuel, almost double to Rs 4 per litre, up from Rs 2 per litre. 

Notably, the tax rates are reviewed every two weeks on the basis of average oil prices in the previous two weeks. India initiated windfall profit taxes last year in July, becoming another nation to introduce a tax on the profits of energy companies.

The government collected about Rs 40,000 crore in special additional excise duty levied on crude oil production and petroleum products exports for the previous fiscal year. The duty was imposed on July 1, 2022, reported Economic Times. 

These taxes are levied on windfall profits made by oil producers on any price they receive above the limit of $74 per barrel. While the tax on fuel exports is decided on margins earned by refiners on overseas shipments. The difference between the international oil price and the cost indicates these margins. 

This is not the first time the government has announced a cut in the windfall tax. Earlier in May this year, the windfall tax on crude petroleum was reduced to zero before raising it again once global crude oil prices started increasing. The currency crude prices are ranging above $88 a barrel. 

Notably, global oil prices touched a record high in over half a year on Friday, the report added. This price increase comes at a time of supply cuts by the Organisation of The Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+. While Saudi Arabia is expected to cut it’s production voluntarily by about 1 million barrel per day, Russian Deputy Prime Minister Alexander Novak informed earlier in the week that Russia has agreed with OPEC+ partners to reduce it’s oil exports in the coming months.