Govt Cuts Windfall Tax On Crude Oil To Nil. Tax On Diesel Also Slashed To Rs 0.5 Per Litre

There is no windfall tax on petrol and ATF. The windfall tax rates are reviewed every fortnight based on average oil prices in the previous two weeks

The Centre has cut windfall tax on crude oil from Rs 3,500 ($42.56) per tonne to nil effective from Tuesday. According to a notification by the Department of Revenue, the windfall tax on diesel was also slashed to Rs 0.5 per litre from Rs 1 per litre earlier. The decision comes at a time when OPEC+ decided to cut production. The move led to Brent rising by almost 6 per cent to $84.58 per barrel on Monday, reported PTI. 

There is no windfall tax on petrol and ATF. The windfall tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

The windfall profit taxes were first imposed on July 1, 2022, as India joined a growing number of nations that tax super normal profits of energy companies. At that time, petrol and ATF attracted export duties of Rs 6 per litre ($12 per barrel) each, and Rs 13 a litre ($26 a barrel) was levied on diesel. A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.

The government, on March 20, slashed the windfall tax by Rs 900 per tonne to Rs 3,500 per tonne from Rs 4,400 per tonne. However, it had hiked the export duty on diesel from Rs 0.50 per litre to Rs 1 per litre. 

On March 4, the windfall tax on the export of diesel to an all-time low of Rs 0.50 per litre. The levy on crude oil was hiked to Rs 4,400 per tonne from Rs 4,350 per tonne earlier. 

 

Crude oil is refined and transformed into fuels like petrol, diesel, and aviation turbine fuel (ATF).  The export tax on petrol was scrapped in the very first review. The windfall tax on ATF was scrapped on March 4.

 

In the meantime, the decision by OPEC+ to cut crude oil production led to a sharp rise in global crude oil prices, renewing inflation concerns. Global oil benchmark Brent crude futures rose 5.28 per cent to $84.11 per barrel.

 

Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas told PTI, "Core PCE (Personal Consumption Expenditures) inflation showed cooling inflation in the US, raising expectations that the US Federal Reserve may be at the end of its rate hike cycle. However, upbeat macroeconomic data cushioned the downside."