Petrol To Get Cheaper As Government Slashes Windfall Tax on Crude Petroleum To Rs 4,100 Per Tonne

The central government on Monday decided to slash the windfall tax on crude petroleum prices after reimposing it last month. It is reduced to Rs 4,100 per tonne from Rs 6,400 per tonne with effect from May 2.

A windfall tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits. The government, which revises tax rates fortnightly based on oil price fluctuations, has made no change in the windfall tax on petrol, diesel, and aviation turbine fuel.

The government reduced the windfall tax on domestic production of crude by nearly 36 per cent after reimposing it in April.

Earlier in April the Central Board of Indirect Taxes and Customs (CBIC) had decided to cut the windfall tax on crude oil from Rs 3,500 (42.56 USD) per tonne to nil while reducing the export duty on diesel to 50 paise. Later again the government reimposed a levy of Rs 6,400 per tonne on April 19 to earn revenue.

The government revises tax rates fortnightly based on oil price fluctuations, has made no change in the windfall tax on petrol, diesel, and aviation turbine fuel.

In april the government had decided to increase 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) was kept unchanged at nil. While it decided to remove the export duty levied on diesel, after which, the SAED on diesel has become nil from Rs 0.50 per litre.

This move is expected to impact oil companies, as now they will have to pay a higher tax on the sale of crude oil in the domestic market. However, for the manufacturing sector, the removal of export duty on diesel is expected to provide relief as it relies heavily on diesel for power generation and transportation.

Last year in July India imposed the windfall tax on crude oil producers and extended the levy on exports of gasoline, diesel and aviation fuel after private refiners wanted to make gains from robust refining margins in overseas markets, instead of selling at home.