To rationalise the petroleum sector’s tax structure, the government has reimposed a windfall tax on domestically produced crude oil of Rs 6,400 per tonne. Petrol and Aviation Turbine Fuel (ATF) will remain exempt from the tax. The revised duty will be applicable from April 19, the Central Board of Indirect Taxes and Customs notified.
As the name suggests, a windfall tax is levied on specific industries when they experience an unexpected and dramatic profit increase. Last year, when the Russia-Ukraine war broke out, crude oil prices soared. That was when the government imposed a windfall tax for the first time on July 1, 2022. The government expects to generate additional revenue from this revision of the windfall tax on crude oil production.
The move is expected to impact oil companies, but government officials said these tax rates absorb only a part of the extra profits these companies earn during high prices. The government reviews these rates every fortnight to calibrate the tax mop-up. The last review was on April 4, when the windfall tax on the export of diesel was halved to Rs 0.50 per litre and that on crude oil was slashed from Rs 3,500 per tonne to zero.
On April 19, the government increased the Special Additional Excise Duty (SAED), commonly known as the windfall tax on domestic crude petroleum production, from nil to Rs 6,400 per tonne. The government also scrapped the export duty on diesel, making the SAED on Petrol, Diesel and ATF scrapped.