Windfall Tax on Diesel, ATF Exports Increased: The government has once again revised the newly-introduced windfall tax levied on crude oil, diesel and Aviation Turbine Fuel (ATF). According to a government notification issued on Thursday, the tax on domestically produced crude oil has been reduced to Rs 13,000 per tonne from Rs 17,750 per tonne, while export taxes on jet fuel has been hiked to Rs 2 per litre from zero. Additionally, The excise duty on the export of diesel has been hiked to Rs 7 per litre from Rs 5 per litre earlier. The excise duty on the export of petrol continues to be nil.
What is Windfall Tax?
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.
India imposed windfall taxes on July 1, joining a growing number of nations that taxes super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.
On July 1, export duties of Rs 6 per litre ($12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel ($26 a barrel). A Rs 23,250 per tonne windfall profit tax on domestic crude production ($40 per barrel) was also levied.
At the time of imposing the windfall tax, the government had stated that the objective behind the move was to shore up domestic supplies as refiners were preferring to export than to meet the local requirements.
In the previous review meets, the export duties on petrol and aviation turbine fuel (ATF) were removed by the government.
The Centre had a month ago eliminated a levy on gasoline exports and cut windfall taxes on other fuels less than three weeks after they were imposed; the windfall tax on diesel and aviation fuel shipments was reduced by Rs 2 per litre.
The new rates will be applicable from August 19, according to a notification issued by the finance ministry late Thursday evening.
The government has maintained that the levy was introduced in view of the windfall gains made by the domestic crude producers and refiners due to high global crude and product prices.
The levy was expected to compensate for the reduction in the excise duty on petrol and diesel to provide relief to consumers. But the reduction in the windfall cess from the initial levels is expected to reduce the realisation for the government.
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