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Informist, Monday, Dec. 2, 2024

 

--Fin min official: Govt collected INR 60 bln from windfall tax FY25 so far 

 

By Priyasmita Dutta 

 

NEW DELHI – The Centre has collected INR 60 billion from windfall gains tax so far in 2024-25 (Apr-Mar), a senior finance ministry official said Monday. In FY23, the first year when windfall gains tax, or special additional excise duty was imposed, the government had collected INR 250 billion. In FY24, collections under this head were to the tune of INR 130 billion. Collections from windfall gains tax contribute to a portion of the government's total excise duty mop-up.

 

Earlier in the day, the government scrapped the windfall gains tax following the petroleum ministry's request to the finance ministry in September to review its imposition. Introduced in July 2022, these levies, in the form of a cess, taxed the supernormal gains made by oil producers and fuel exporters due to high crude oil and fuel prices globally. The government reviewed these taxes fortnightly on the basis of oil prices and fuel margins in the international market. 

 

Since July 2022, the tax has been revised 50 times, with the latest being on Sept. 17, when it was reduced to nil on domestic crude oil. The windfall tax on exports of diesel, aviation turbine fuel, and petrol has remained nil for a much longer time. The latest notification on scrapping the tax follows a fall in crude oil prices in the international market below $75 per barrel, the threshold the government maintained for imposing the tax.

 

Brent crude oil futures traded near $70-$74 per barrel in the last fortnight. When the government had first levied the cess on domestic crude, it was priced INR 23,250 per tonne, which translated to around $40 a barrel. While the scrapping of the tax comes as a huge positive for upstream oil companies like Oil and Natural Gas Corp Ltd., Oil India Ltd. and Vedanta Ltd., it comes as a negative for the government as it will pinch its indirect tax kitty.

 

Government data released Friday showed that excise duty mop-up during Apr-Oct was up only 0.6% on year, compared to the budgeted growth target of 4.5% for the whole year. In absolute terms, the government aims to collect INR 3.19 trillion from excise duties in FY25. Up to October, it has collected INR 1.51 trillion. India Ratings and Research said in a report Wednesday that excise duty collections are likely to be INR 163.67 billion lower than the estimate of INR 3.19 trillion.

 

The government imposed these levies 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 = INR 84.70

 

Edited by Ashish Shirke

 

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