The Indian government has made a significant reduction in the windfall tax imposed on domestically produced crude oil, lowering it to ₹2,100 per tonne from the previous rate of ₹4,600 per tonne.
This decision marks a continuation of the government’s approach to adjust the tax based on fluctuations in international oil prices.
The windfall tax on the export of diesel and aviation turbine fuel (ATF) remains at zero, following the same policy established in the previous tax revision on July 31, when the special additional excise duty (SAED) on crude oil was reduced by 34.3% from ₹7,000 to ₹4,600 per tonne, with no changes made to the tax on diesel and ATF.
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Windfall tax was first introduced in July 2022, aimed primarily at crude oil producers. Later, it was expanded to include gasoline, diesel, and ATF exports. The policy’s main objective was to curb the tendency of private refiners to export fuels to foreign markets where prices were higher, thus ensuring that domestic supply would meet national demand.
The windfall tax is reviewed every two weeks, with adjustments based on the international market conditions for crude oil and refined products. This kind of tax is generally imposed by governments when companies in a particular industry, such as oil, benefit from extraordinary profits due to events like significant price drops in international markets.
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The introduction of ‘windfall tax’ was a response to such a scenario, where domestic refiners were reaping large profits from global price variations, potentially at the expense of local supply stability.
As international crude prices continue to fluctuate, further revisions to the windfall tax are likely, as the government aims to stabilize the domestic fuel market while also addressing the fiscal impacts of global price changes.
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