Windfall Tax Reimposed On Domestic Crude, Diesel Export Duty Scraped

After this revision only domestically produced crude oil will now be subject to the windfall tax, which is currently set at Rs. 6,400 per tonne; petrol, diesel, and ATF will continue to be exempt.

Windfall tax is levied by governments when an industry unexpectedly earns large profits — primarily due to an unprecedented event.

Source : Getty

Centre on Tuesday reimposed the windfall tax on domestic crude oil production and removed the export duty on diesel via a gazette notification. The move is seen as an effort to rationalise tax structure in the petroleum sector and promote investments. The Special Additional Excise Duty (SAED) on crude petroleum has been raised from nil to Rs 6,400 per tonne.

Windfall tax is levied by governments when an industry unexpectedly earns large profits — primarily due to an unprecedented event.

The tax rates are reviewed every fortnight by the government reviews to calibrate the tax mop-up. In this review, the government increased the Special Additional Excise Duty (SAED) on crude petroleum from nil to Rs 6,400 per tonne. however, the SAED on petrol and Aviation Turbine Fuel (ATF) has been left unchanged at nil.

In this review, the government also decided to remove the export duty on diesel. The SAED on diesel will reduce from Rs 0.50 per litre to nil.

After this revision only domestically produced crude oil will now be subject to the windfall tax, which is currently set at Rs. 6,400 per tonne; petrol, diesel and ATF will continue to be exempt.

READ: Facebook-Parent Meta To Lay Off 10,000 Employees: Report

According to a notification from the Central Board of Indirect Taxes and Customs, the revised duty will take effect on April 19.

In the previous review on April 4, the Centre cut windfall tax on crude oil from Rs 3,500 per tonne to nil. 

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 latest change comes as oil prices are rising due to unexpected reductions in OPEC+ production. The government imposed a windfall tax after crude oil prices soared after the Russia-Ukraine war broke out.

The oil producers fetched huge profits then as a windfall gain and the government started taxing those extra earnings.

This revision of the windfall tax on crude oil production is expected to generate additional revenue for the government.