India slashes windfall tax on crude oil, diesel exports

The government last week slashed to less than half the windfall profit tax on domestically produced crude oil and also reduced the levy on diesel. The revised tax rates are effective from December 2, 2022. The tax on crude oil produced by firms such as state-owned Oil and Natural Gas Corporation (ONGC) has been reduced to Rs 4,900 per tonne from the existing Rs 10,200 per tonne, as per a government notification. In the fortnightly revision of windfall profit tax, the government cut the rate on export of diesel to Rs 8 per litre from Rs 10.5 per litre. The levy includes Rs 1.5 per litre as road infrastructure cess. The special additional excise duty on petrol continues to remain nil and on aviation turbine fuel (ATF) it is at Rs 5 a litre. When the levy was first introduced, a windfall tax was levied on the export of petrol as well as diesel and ATF. But the tax on petrol was scrapped in subsequent fortnightly reviews. While windfall profit tax is calculated by taking away any price that producers are getting above a threshold, the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference of international oil price realised and the cost. See also: Essar Oil UK to build $430 mn carbon capture facility at StanlowKirit Parikh panel suggests floor and ceiling price for gas