Govt reduces windfall tax on crude petroleum to Rs 6,300 per tonne, tax on diesel halved

windfall tax

The Union government on November 16 slashed windfall tax on crude petroleum to Rs 6,300 per tonne from Rs 9,800. The special additional excise duty (SAED) on diesel was also halved to rupee 1 from Rs 2 per litre, according to the notification.

Further, the windfall tax on aviation turbine fuel and petrol continue to be nil. The decision was taken in the fortnightly review of Windfall gains tax.

The government's announcement on cut in windfall tax comes amid the continuing volatility in global crude oil prices. Signals of higher supply from the United States met worries about lackluster energy demand from Asia.

In the last fortnightly review on October 31, the government had hiked windfall tax on petroleum crude to Rs 9,800/tonne from Rs 9,050/tonne with effect from November 1.

India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.

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

A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.

Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

Meanwhile, oil prices fell on November 16, extending losses from the previous session, as signals of higher supply from the United States met worries about lackluster energy demand from China.

Brent futures were down 48 cents at $80.70 a barrel at 0630 GMT. U.S. West Texas Intermediate crude (WTI) CLc1 shed 53 cents to $76.13 a barrel, according to Reuters.

Both benchmarks fell more than 1.5 percent in the prior session.