Government slashes windfall tax on crude oil to Rs 5,000 per tonne

The government has announced a reduction in the windfall gains tax on crude oil from Rs 6,300 per tonne to Rs 5,000 per tonne, according to reports on Thursday.

This move comes after the tax rate was previously lowered from Rs 9,800 per tonne to Rs 6,300 per tonne on November 16, based on average oil prices in the preceding two weeks.

The windfall gains tax, implemented as the Special Additional Excise Duty (SAED), applies to domestically produced crude oil. In late October, the tax was increased from Rs 9,050 per tonne to Rs 9,800 per tonne, with the change taking effect from November 1, as stated in an official notification.

Additionally, the SAED on diesel exports saw a reduction from Rs 4 per litre to Rs 2 per litre, providing some relief in the context of evolving economic conditions.

What is windfall tax?

The imposition of the windfall tax commenced in July 2022, with initial export duties set at Rs 6 per litre (USD 12 per barrel) for petrol and aviation turbine fuel (ATF) and Rs 13 per litre (USD 26 per barrel) for diesel.

This tax is triggered when global benchmark rates surpass USD 75 per barrel, impacting the export of diesel, ATF, and petrol when product margins rise above USD 20 per barrel.

These adjustments in the windfall gains tax reflect the government’s responsiveness to changing market dynamics and global oil prices, aiming to strike a balance between fiscal considerations and supporting economic stability.

The move is expected to have implications for the energy sector and contribute to the overall economic strategy in the context of evolving energy markets.

Published By:

Koustav Das

Published On:

Dec 1, 2023

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