Windfall profit tax on domestic crude reduced to Rs13,000 per ton

19 Aug 2022 , 09:42 AM

Late on Thursday, the government raised the windfall profit tax on diesel export from Rs5 per liter to Rs7 per liter. In addition, the government reinstated a Rs2 per liter tax on the export of aviation turbine fuel.

The revised adjustments will take effect on August 19th. However, the windfall tax on domestically produced crude oil has been decreased by the Central Board of Excise and Customs (CBIC) to Rs13,000 per tonne from Rs17,750 per tonne previously. This reduction will be welcome news for producers like ONGC and Vedanta Ltd.

The recently implemented windfall tax is currently going through its third amendment. However, there is still no tax on gasoline exports. The change occurs as crude oil prices have fallen to a six-month low of under $90 per barrel on the world market.

India introduced a windfall profit tax on July 1, joining an increasing number of countries that tax energy companies’ higher-than-average profits. However, since then, oil prices have dropped internationally, reducing profit margins for both oil producers and refiners. After that, on July 20, during the first fortnightly review, the Rs6 per liter export duty on gasoline was eliminated, and the Rs11 and Rs4 export taxes on diesel and jet fuel, respectively, were each reduced by Rs2. Also reduced to Rs17,000 per tonne was the tariff on crude oil produced locally.

The windfall tax on domestically produced crude was raised by the government on August 3 from Rs17,000 per tonne to Rs17,750 per tonne. In contrast, the export tax on diesel and aviation turbine fuel was decreased in line with a decline in the price of petroleum products globally. It also reduced the charge for diesel in the second revision from Rs11 per liter to Rs5 per liter. It also eliminated the Rs4 per liter levy on the export of aviation turbine fuel.

The new tax was introduced as a result of reports that domestic enterprises were reaping enormous profits as a result of the sharp increase in oil prices that has occurred due to geopolitical unrest. The government stated that it would review the exports and imports of these commodities every two weeks to revise its choice when applying the new levies.

Taxes were cut earlier this month as India’s trade deficit increased to a record level in July as high commodity prices and a depreciating rupee increased the nation’s import costs. Export-to-import discrepancy increased to $31.02 billion in July from $26.18 billion in June. The import bill is rising as a result of declining exports, rising commodity prices, and a weak rupee. Comparing July to the same month last year, imports increased 43.59% and exports decreased 0.76%.