Windfall Gains Tax
Govt cuts windfall gains tax on domestic crude oil to 1,850 rupees/tn
This story was originally published at 08:01 IST on 31 August 2024
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NEW DELHI – The government has cut the windfall gains tax on domestically produced crude oil by 250 rupees a tn to 1,850 rupees a tn, the finance ministry said in a notification late on Friday. The cess on diesel exports, aviation turbine fuel exports, and petrol remained unchanged at nil. The change in the tax will be effective from today.
This is the 49th revision in windfall gains tax and marks over two years of its imposition. These taxes, which are in the form of cess, are for taxing supernormal gains of oil producers and fuel exporters. The government reviews these taxes on a fortnightly basis of oil prices and fuel margins in the international market.
These tax changes reflect the movement of international crude oil and fuel margins over the past couple of weeks. Brent crude oil futures have traded near $75-$80 per barrel in the last fortnight, compared to $75-$82 per bbl in the previous two weeks.
The revised cess translates to nearly $3 per bbl. When the government had first levied the cess on domestic crude, it was 23,250 rupees per tn, and translated to around $40 a bbl. The cut in windfall gain taxes comes as a positive for upstream oil companies such as Oil and Natural Gas Corp Ltd, Oil India Ltd, and Vedanta Ltd.
These levies were first imposed on Jul 1, 2022, to tax the windfall profits of crude oil producers and fuel exporters due to high oil and fuel prices globally. While taxes on petrol exports were also imposed initially, they were reduced to nil from Jul 20, 2022, and have not been hiked since.
The government had imposed the levies on fuel exports after fuel pumps in some parts of the country faced supply shortages, partly due to private sector refiners reducing domestic sales of petrol and diesel in favour of significantly more lucrative exports. Private fuel retailers Reliance Industries Ltd and Nayara Energy reportedly reduced domestic retail sales due to heavy under-recoveries.
As for domestic crude oil, upstream oil companies were raking in massive profits due to the surge in global oil prices in the aftermath of Russia's invasion of Ukraine in 2022. Indian oil producers price crude oil in line with global prices. End
US$1 = 83.86 rupees
Reported by Priyasmita Dutta
Edited by Avishek Dutta
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