India is considering windfall gains tax hike amid rising crude prices: Sources

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

The government is contemplating an increase in windfall gains tax as crude oil prices surge, sources have revealed to CNBC-TV18. With crude prices surpassing the $90 per barrel mark over the last fortnight, concerns have escalated, prompting discussions within governmental circles.

The surge in crude prices has led to significant hikes in fuel costs domestically. Diesel prices have surged past the ₹102.9 per litre mark, while petrol has reached an unprecedented ₹100 per litre. This steep rise in fuel prices has sparked worries among policymakers, necessitating a review of existing taxation mechanisms.

The last revision in windfall gains tax was effective from March 16. Presently, the levies under windfall gains tax stand at ₹4,900 per tonne for crude petroleum, increased from ₹4,600 per tonne in the previous revision. However, the windfall tax on diesel, petrol, and aviation turbine fuel (ATF) remained nil.

A windfall tax is levied on domestic crude oil if the 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.

India first imposed windfall tax on July 1, 2022. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and ATF and ₹13 a litre ($26 a barrel) on diesel. The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.