Windfall Tax On Crude Oil Cut From Rs 3,500 Per Tonne To Nil

The government has decided to cut the windfall tax on crude oil from Rs 3,500 (42.56 USD) per tonne, effective from today, Tuesday, April 4, 2023 to nil, while reduced the export duty on diesel to 50 paise. This decision was issued by the Central Board of Indirect Taxes and Customs(CBIC) as per Reuters report in Economic Times. The exemption of duty on exports of petrol and aviation turbine fuel (ATF) continues.

In July India had imposed the widfall tax on crude oil producers levies on gasoline, diesel and aviation turbine fuel (AFT) exports after private refiners wanted to make gains from robust refining margins by selling in overseas markets, instead of selling it domestically.

A windfall tax is a surtax imposed by governments on businesses or economic sectors that have benefited from economic expansion.

As per the report, India first imposed windfall profit taxes last year in July to join the nations that tax tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12USD per barrel) each were levied on petrol and ATF while Rs 13 a litre (26 USD a barrel) was levied on diesel.

Later the government scrapped the export tax on petrol in the very first review and on ATF it was removed at the last review on March 4. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

The government levies tax on windfall profits made by oil producers on any price they get above a threshold of USD 75 per barrel. The levy is a fee charged on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the actual cost.

Crude oil which is pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel. Reliance Industries and Rosneft- backed Nayara Energy are primary exporters of fuel in the country.