Windfall tax for domestic crude oil reimposed; duty on export of diesel slashed

Windfall tax for domestic crude oil reimposed; duty on export of diesel slashed

The center revised the windfall tax on all domestically produced crude oil to Rs 6,400 per tonne from nil. The government also scrapped the Special Additional Excise Duty (SAED) from Rs 0.5 per litre to nil. The windfall tax exemptions for the export of petrol and ATF (aviation turbine fuel) continue. These changes in the tax rates will be implemented from Wednesday, 19 April onwards. In the previous revision, the centre slashed the cut on domestically produced crude to nil and halved the SAED imposed on diesel, from Re 1 to Rs 0.5 per litre.What is windfall tax, why is it imposed?

On July 1 2022, windfall profit taxes were first imposed on Indian companies as the country joined a growing number of nations that tax supernormal profits of energy firms. However, international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners. The government levies tax on windfall profits made by oil producers on any price they get above a threshold of USD 75 per barrel. The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily the difference between the international oil price realised and the cost.

Crude oil prices today

Oil prices rose in early Asian trade on Wednesday as U.S. crude inventories were seen falling and on strong Chinese economic data, signalling strengthening fuel demand. Brent crude futures gained 7 cents to $84.84 a barrel at 0020 GMT. West Texas Intermediate U.S. crude was up 3 cents to $80.89 a barrel. Keeping prices from moving higher were concerns that potential increases in U.S. interest rates could dampen growth in the top oil-consuming country, according to Reuters.