In a recent government notification, India has announced the elimination of the windfall tax on petroleum crude, reducing it to zero from the previous rate of Rs 4,100 per tonne. The new tax cut, effective from May 16, aims to provide relief to energy companies operating in the country. However, the windfall tax on petrol, diesel, and aviation turbine fuel (ATF) remains unchanged at zero. This decision comes after a series of revisions in the windfall tax policy. In early May, the government had already reduced the tax on domestically produced crude oil from Rs 6,400 per tonne to Rs 4,100 per tonne. Prior to that, the windfall profit tax was reintroduced, raising it from zero to Rs 6,400 per tonne. Simultaneously, the export duty on diesel was abolished.
These tax rates are reviewed every fortnight based on the average oil prices observed in the preceding two weeks. Since July 1, 2022, India had implemented the windfall profit tax, following the lead of other nations in taxing the exceptional profits earned by energy companies. Export duties were imposed on petrol, diesel, and jet fuel (ATF), while a Special Additional Excise Duty (SAED) was levied on domestically produced crude oil. Initially, export duties of Rs 6 per litre on petrol and ATF, as well as Rs 13 per litre on diesel, were introduced. The windfall profit tax is calculated by deducting any price received by producers above a certain threshold.
The windfall tax was introduced to offset the reduction in excise duty on petrol and diesel, aiming to provide relief to consumers. However, the reduction in windfall cess from the initial levels is expected to decrease the government’s revenue collection. By eliminating the windfall tax on petroleum crude, India hopes to support energy companies while keeping fuel prices stable for consumers. In summary, India has scrapped the windfall tax on petroleum crude, reducing it to zero from Rs 4,100 per tonne, effective May 16. The tax on petrol, diesel, and ATF remains unchanged at zero. This move aims to provide relief to energy companies, but it may impact the government’s revenue collection.