Government Raises Windfall Gains Tax on Crude Petroleum for the Third Time in February

26 Mar 2024 , 03:18 PM

On February 29, the Union government updated its windfall profits tax on crude petroleum, which would take effect on March 1, 2024. The tax is levied in the form of Special Additional Excise Duty. According to the changes, SAED on crude petroleum would rise from ₹3,300/tonne to ₹4,600/tonne.

This is the third time this month that the administration has increased the windfall tax on domestically produced crude oil. On February 15, the price was raised to ₹3,300 per tonne from ₹3,200. Prior to then, it cost ₹1,700 per tonne.

However, the tax on fuel has been reduced from ₹1.50/litre to ₹nil/litre. It was increased to ₹1.50/litre from zero earlier this month. Furthermore, SAED for petrol and aviation turbine fuel (ATF) would remain zero.

The government puts a tax on oil companies’ windfall gains at prices above $75 per barrel. The tariff on petroleum exports is based on the cracks or margins that refiners earn from international sales. These margins are basically the difference between the worldwide oil price achieved and the cost.

India introduced windfall profit taxes for the first time on July 1, 2022, joining a number of other countries that tax energy businesses’ above-average earnings. At the time, export tariffs on petrol and ATF were ₹6 per litre ($12 per barrel), while diesel was ₹13 per litre ($26 per barrel).

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