The Indian government on Friday increased the windfall tax on crude petroleum to Rs 10,000 per tonne from Rs 6,700 per tonne, according to a government notification. The new rates would be effective from Saturday (September 16).
Also, the special additional excise duty (SAED) or duty on the export of diesel will be reduced to Rs 5.50 per litre, from Rs 6 per litre. The duty on Aviation Turbine Fuel (ATF), commonly known as jet fuel, will be reduced to Rs 3.5 per litre from Rs 4 per litre. However, SAED on petrol will continue at nil.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks. The government’s collection from the SAED, imposed on the production of crude oil and the export of petroleum products from July 1, 2022, is estimated at around Rs 40,000 crore in FY2023.
Notably, a windfall tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits. So, as crude prices cross 90 dollars a barrel, the government has hiked windfall tax on oil companies to tax higher profits.
Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).
India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax super-normal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.
The government levies tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel. The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.
s crude prices cross 90 dollars a barrel, Govt hikes windfall tax on oil companies to tax higher profits
First Published: Sept 15, 2023 11:02 PM IST
