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Govt hikes windfall profit tax on crude, diesel, ATF
The government has raised windfall profit tax on locally produced crude oil by 23.52% to ₹2,100 per tonne from Tuesday and also increased the levy on exports of diesel and aviation turbine fuel (ATF) . Both changes were made against the backdrop of firmer international oil prices.
The government has raised windfall profit tax on locally produced crude oil by 23.52% to ₹2,100 per tonne from Tuesday and also increased the levy on exports of diesel and aviation turbine fuel (ATF) . Both changes were made against the backdrop of firmer international oil prices.
While tax on domestically-produced crude oil was raised from ₹1,700 per tonne to ₹2,100 a tonne. Tax on diesel exports increased from ₹5 per litre to ₹6.50 a litre , according to a government order issued late night on Monday. The tax on diesel is inclusive of ₹1.50 per litre additional excise duty.
According to the order issued by the ministry of finance, the levy on exports of ATF was also raised from ₹1.50 per litre to ₹4.50. The tax on crude and fuel are realigned with their respective international rates every fortnight.
This is the 12th revision in windfall tax after its imposition on July 1, 2022. The windfall tax was levied on petroleum items on July 1 last year to offset ballooning public expenditure on fuel, food and fertiliser subsidies even as domestic oil producers and refiners were seen to be making abnormal profits due to price volatility in international markets arising from the Russia-Ukraine war.
The windfall levies on crude and products have been raised because of a spike in international oil rates. Benchmark Brent crude, which was trading at less than $80 a barrel on the day the taxes were last revised (December 16, 2022), jumped to $85.91 on Monday . On Tuesday, the price rose to $87 a barrel.
“Windfall taxes are not just based on international crude oil prices. These levies are being reviewed on fortnightly basis and depend upon many factors such as international oil prices, exchange rate, quantity of exports,” a government official said requesting anonymity.
The government last revised the tax on December 16 when it slashed the levy on locally produced crude oil by 65% to ₹1,700 per tonne, reduced the tax on diesel exports by 37.5% to ₹5 per litre and cut it on exports of jet fuel by 70% at ₹1.50 per litre due to a sharp fall in average global oil prices. India’s daily average crude oil purchase price on December 15 was $77.79 a barrel.
Initially, the levy on indigenously-produced crude was ₹23,250 per tonne, ₹6 per litre each on petrol and ATF and ₹13 a litre on diesel. The tax on petrol was removed in the first revision itself (from July 20, 2022).
