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The windfall profit tax levied on domestically produced crude oil has been reduced from Rs 6,400/tonne to Rs 4,100/tone. This has resulted in a significant 35.9% reduction in the tax rate.
The Indian government has announced that the exemption from export duty on petrol, diesel, and aviation turbine fuel will continue starting from May 2, as per a notification issued by the Central Board of Indirect Taxes and Customs. This decision comes after the government previously re-imposed the windfall profit tax on domestically produced oil and removed the export duty on diesel.
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The recent update is a result of the decline in oil prices. The tax rates are evaluated every two weeks, taking into account the average oil prices in the preceding fortnight.
India began enforcing the windfall profit tax from July 1, 2022, following in the footsteps of other countries that impose taxes on the excess profits of energy corporations. Along with this tax, the country also introduced duties on the export of petrol, diesel, and aviation turbine fuel (ATF), and a Special Additional Excise Duty (SAED) was imposed on domestically produced crude oil. Furthermore, New Delhi implemented export levies of Rs 6 per litre on petrol and ATF and Rs 13 per litre on diesel.
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The windfall profit tax is determined by subtracting any price received by producers above a particular threshold. This tax was introduced to offset the decrease in excise duty on petrol and diesel, providing relief to consumers. However, reducing the windfall cess from its original levels is anticipated to decrease the government’s revenue realization.
Companies such as Reliance Industries Ltd and Nayara Energy, which rely on Rosneft, are the main exporters of diesel and aviation turbine fuel (ATF). On the other hand, the windfall profit tax on domestic crude oil targets producers like Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd., which are owned by the government.
