Centre slashes windfall profit tax on crude oil
Special Addl Excise Duty on domestically produced crude oil reduced to Rs6,300/ tonne from Rs9,800; SAED on the export of diesel was reduced to Re1/ litre from Rs2; The decision came as global crude prices easing
Brent crude trading at $79.35/bbl
Oil’s Well
- A windfall tax is levied if global crude price rises above $75/bbl
- The tax rates are reviewed every fortnight
- India first imposed windfall profit taxes on July 1, 2022
- Levy on domestic crude oil dropped to nil in first half of April
New Delhi: The government on Thursday cut the windfall profit tax on crude oil produced in the country and on exports of diesel in line with softening international oil prices. The tax, levied in the form of Special Additional Excise Duty or SAED, on domestically produced crude oil has been reduced to Rs6,300 per tonne from Rs9,800 per tonne, according to an official notification. SAED on the export of diesel was reduced to Re1 per litre from Rs2 per litre. The levy on the export of jet fuel or ATF and petrol will continue to be zero. The new tax rates came into effect from Thursday. At the last revision effective from November 1, the government had increased the tax on crude oil to Rs9,800 per tonne from Rs9,050 per tonne.
Simultaneously, the levy on the export of diesel was halved to Rs2 and that on jet fuel was brought to nil from Re1 per litre. International oil prices have softened since the last revision, necessitating the reduction. The basket of crude oil that India imports has averaged $84.78 per barrel this month as against $90.08 a barrel average in the month of October and $93.54 in September.
India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of Rs6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs13 a litre ($26 a barrel) on diesel. A Rs23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks. A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.
