The Central government decided to raise windfall taxes on domestic crude on Tuesday. Export of petroleum to continue without the imposition of the windfall tax.
On Tuesday, the central government eliminated the Rs 4 per litre tax on the export of Aviation Turbine Fuel (ATF). With this elimination, the government further increased the windfall tax on crude oil producers by 4.41 percent and decreased the cess on the export of diesel from Rs 11 to Rs 5 per litre.
It must also be observed that the Central government increased the windfall tax on domestically produced crude oil to Rs 17,750 tonne.
Indian-produced crude oil has been subject to an extra levy of Rs 17,000 per tonne for the past two weeks.
The tax was Rs 23,250 per tonne between July 1 and July 19, with the intention of limiting windfall profits for domestic oil producers who sell their output at international parity rates even to domestic refineries.
The reason for government raising windfall taxes
Following the tax’s implementation on July 1st, Revenue Secretary Tarun Bajaj had stated that it would be evaluated every 15 days, taking into account, among other things, the foreign exchange rate and world crude prices.
On July 1, the Center implemented an export tax of Rs. 6 per litre on the fuel and ATF and Rs. 13 per litre on diesel. On sales of domestic crude, a windfall tax of Rs 23,250 per tonne was applied.
On July 20, the taxes were first evaluated. The Rs 6 per litre duty on fuel exports was eliminated, while the Rs 11 and Rs 4 levies on diesel and jet fuel (ATF) exports, respectively, were decreased.
The tax on crude produced domestically was also reduced to Rs 17,000 per tonne as of July 1.
The government first implemented windfall taxes on July 1 in response to huge profits made by oil and gas corporations as a result of rising energy prices brought on by the conflict between Russia and Ukraine. Prices for the crude that domestic producers sell to refiners are based on market rates abroad. From February until a month ago, the benchmark Brent crude prices have been generally at multi-year high levels.
What is a windfall tax?
A one-time tax imposed by the government on a business is known as a windfall tax. It is assessed on an unanticipated or unexpectedly significant profit, particularly one acquired unfairly.
Now, the price of petroleum on the global market has increased significantly recently. Domestic oil producers sell their products to domestic refineries for prices that are competitive internationally. Thus, domestic crude producers are benefiting unexpectedly.
The revised rates are applicable from Wednesday, 3rd August, according to the notice issued by the finance ministry on Tuesday evening late.
