Govt reduces windfall tax on domestic oil producers as global prices drop
The windfall tax was imposed from July 1 to tax “abnormal” profits on local oil producers who benefitted from the global spike in energy prices on account of Russia’s invasion of Ukraine
The government on Wednesday reduced windfall tax on domestically produced crude, export of diesel and aviation turbine fuels (ATF) and withdrew the levy on petrol due to softening of international oil prices, but no relief has been given to the consumers.
A government notification issued on Tuesday late night effecting changes in the windfall tax rates for various petroleum items said the Union government, “being satisfied that it is necessary in the public interest so to do” made these amendments in its earlier decision of June 30.
According to the notification, the windfall tax on crude has been reduced from ₹23,250 per tonne to ₹17,000 per tonne from Wednesday. The levy, imposed as export duty on diesel, has been reduced from ₹13 per litre to ₹10 and ATF from ₹6 per litre to ₹4 a litre.
“The tax is completely withdrawn for exports of petrol because most of the private petrol pumps are now selling the fuel domestically after a significant drop in its rate in the international market,” a person aware of the development said requesting anonymity.
The government imposed the windfall tax from July 1 on exports by oil refiners and producers, announcing levies of ₹6 per litre on every litre of petrol, ₹13 on every litre of diesel, and ₹23,250 on every tonne of domestically produced crude oil in a decision aimed at increasing local supplies and boosting its revenues.
The tax was imposed after the domestic companies were seen to be making “abnormal” profits since oil prices have shot up in global markets due to geopolitical turmoil, the Union finance ministry said earlier on the rationale for introducing the new tax.
On that day, the customs duty on gold too was hiked from 10.75% to 15% because of a significant spurt in imports. According to official data, gold imports jumped by over 789% on an annualised basis to $6.03 billion in May this year, which is a major drag on the foreign exchange reserve.
The new levies – windfall tax on petroleum sector, and customs duty hike on gold – became effective from July 1 and the government said that it will review exports and imports of these items every fortnight to amend its decision, if required. HT first reported the plan to impose the windfall tax on May 27.