New Delhi
The government on Monday announced withdrawal of windfall gain tax on domestically produced crude and export-bound petrol, diesel and jet fuel. The levy is already at zilch levels.
“Notification numbers 29/2024 and 30/2024, dated December 2, 2024, issued with immediate effect for withdrawal of windfall tax i.e., special additional excise duty (SAED) levied on production of crude and export of ATF, SAED and Road and Infrastructure Cess (RIC) on export of petrol and diesel,” a Finance Ministry official said, adding that notification has been laid in Parliament.
According to officials, the government got around ₹25,000 crore through windfall levy in Fiscal Year 2022-23, which dropped to ₹13,000 crore. In the current fiscal, it collected around ₹6,000 crore.
India first imposed windfall profit taxes last July, joining several countries that tax super-normal profits of energy companies. At that time, export duty of ₹6 per litre ($12/bbl) was levied on petrol and ATF, and ₹13 a litre ($26/bbl) on diesel. A ₹23,250 per tonne ($40/bbl) windfall profit tax on domestic crude production was also levied.
Reviewing tax rates
Tax rates were reviewed every fortnight based on the average oil prices in the previous two weeks. The domestic producers of petroleum crude, like ONGC, sell their crude at international parity price. As international crude prices rose sharply, these producers made super-normal profits. The prices of diesel, petrol, and ATF rose even more sharply, which led to extraordinary cracking margins (difference between the product price and the crude price) on exports of these products. The cess/duties were imposed in this background. As detailed above, these are being reviewed periodically, considering all relevant factors, including international prices.
Based on global prices
The windfall tax has nothing to do with retail price as there is a separate tax structure comprising a Central’s levy (Central Excise Duty at a specific rate) and a State’s levy (VAT/Sales Tax at an ad valorem rate) for petroleum products sold in the market. For export-bound petroleum products and domestically produced goods, the realisation is directly based on global prices. When prices are high, there is possibility of windfall gains and the government imposes an additional levy only in such cases.
India imports about 85 per cent of its crude oil requirements. India also imports LPG and Natural gas to the extent of about 55 per cent and 50 per cent of its domestic consumption, respectively. India does not export crude oil. The installed refining capacity in the country is more than the domestic needs for petroleum products and the export of petroleum products is among the biggest sources of foreign exchange earnings for the country. The government takes into account all relevant factors while making interventions on the calibration of duties and taxes on petroleum products. Recent steps have also been taken in line with this approach of the government, said a Finance Ministry official.