The central government has decreased the windfall profit tax on locally-produced crude oil in line with a fall in international rates, and reduced the levy on export of diesel and jet fuel (ATF). The new rates have come into effect from September 17, Saturday. At the fifth fortnightly review, the government reduced tax on domestically-produced crude oil to Rs 10,500 per tonne from Rs 13,300 per tonne.
The levy on the export of diesel was reduced to Rs 10 per litre from Rs 13.5 per litre, while the tax on Aviation Turbine Fuel (ATF) exports was cut to Rs 5 a litre from Rs 9 per litre, according to a finance ministry notification issued late Friday night. International oil prices have fallen to six-month lows this month, leading to a reduction in the windfall profit tax. A fortnight ago, windfall taxes on diesel and Aviation Turbine Fuel (ATF) were hiked. On crude oil, the rate was hiked to Rs 13,300 per tonne from earlier Rs 13,000 per tonne.
The basket of crude oil that India buys has averaged $92.67 per barrel in September as against $97.40 in the previous month. While private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the principal exporters of fuels like diesel and ATF, the windfall levy on domestic crude targets producers like state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.
This comes days after finance minister Nirmala Sitharaman said windfall tax on petroleum products, crude is not ad hoc, but being charged in regular consultation with the industry. It is unfair to call windfall tax as ad hoc, because the tax rate and its resetting are done in complete consultations with the industry, she said.
“The very idea was implemented after taking the industry into full confidence,” she said at a function organized by Elara Capital. “When we suggested the idea we had told the industry that the tax rate will be reviewed every 15 days and we have been doing that,” Sitharaman said.
India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. But international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners. Export duties of Rs 6 per litre ($12 per barrel) were levied on petrol and aviation turbine fuel and Rs 13 a litre ($26 a barrel) on diesel.
A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied. The duties were partially adjusted in the previous four rounds on July 20, August 2, August 19 and September 1, and were removed for petrol.
A windfall tax is a one-off tax imposed by a government on a company. When a company benefits from something that they are not responsible for, the financial gain that ensues is called windfall profits.
Governments, typically, levy a one-time tax over and above the normal rates of tax on such profits, and that is called windfall tax.
(With PTI inputs)