The Centre has slashed windfall gains tax on domestic production of crude petroleum to Rs 3,500 per tonne from Rs 4400 per tonne, according to a ministry of finance notification on Monday.
While the export duty on diesel has been marginally raised to Rs 1 per litre from Rs 0.50, the export levy on both petrol and Aviation Turbine Fuel (ATF) continues to be nil.
The new rate will be effective from Tuesday onwards, reported the publication Economic Times. Earlier this month, the Centre hiked windfall tax on locally produced crude oil to Rs 4,400 per tonne from Rs 4,350 per tonne. However, it slashed the export duty on diesel to Rs.0.5 per litre and scrapped it for ATF.
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Windfall tax is levied by governments when an industry unexpectedly earns large profits — primarily due to an unprecedented event. The windfall profit taxes were first imposed on July 1, 2022, as India joined a growing number of nations that tax super normal profits of energy companies.
At that time, petrol and ATF attracted export duties of Rs 6 per litre ($12 per barrel) each, and Rs 13 a litre ($26 a barrel) was levied on diesel. A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.
The government levies a tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel.
The duty is revised every fortnight, based on international crude oil prices. The Centre earlier had told Parliament that it estimated to collect Rs 25,000 crore from Special Additional Excise Duty (SAED) for the current fiscal year levied on the windfall tax.
Government officials have indicated that the windfall tax would be removed once oil prices fall by $40 per barrel from what it was in July at the time it was introduced, ($113 per barrel). It essentially means that oil has to trade in the $70-75 per barrel range for the levy to be withdrawn. Rating agency CRISIL states the taxes are here to stay and remain in the Rs 4,000-5,000 per tonne range in the medium term.
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