India cuts windfall tax to zero

India cut windfall tax on petroleum crude to zero from Rs 4,100 per tonne with effect from May 16. The windfall tax on petrol, diesel and aviation turbine fuel (ATF) was left unchanged at zero.

In early May, the govt had slashed windfall tax on domestically produced crude oil to ₹4,100 per tonne from ₹6,400 per tonne.

In the revision before that, the government had reimposed the windfall profit tax on domestically produced oil from zero to ₹6,400 per tonne and scrapped export duty on diesel.

The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks.

Starting July 1, 2022, India imposed the windfall profit tax, joining a growing number of nations that tax super normal profits of energy companies. While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil. New Delhi had then introduced export duties of Rs 6 per litre on petrol and ATF and Rs 13 a litre on diesel.

Windfall profit tax is calculated by taking away any price that producers are getting above a threshold.

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.

Private refiners Reliance Industries Ltd and Rosneft-based Nayara Energy are the primary exporters of fuels like diesel and ATF. The windfall levy on domestic crude aims producers such as state-run Oil and Natural Gas Corporation (ONGC) and Vedanta Ltd.