Government Slashes Windfall Profit Tax On Crude, Petroleum Products

Government cuts windfall tax on domestic crude oil production and export of diesel and jet fuel, in line with global crude prices.

<div class="paragraphs"><p>(Source: Erik Mclean/Unsplash)</p></div>
(Source: Erik Mclean/Unsplash)

The Ministry of Finance on Friday slashed the windfall profit tax on domestic crude oil and simultaneously cut the levy on export of diesel and aviation turbine fuel, in line with falling international crude oil prices.  

The new rates will come into effect from Sept. 17, a government notification said. 

The tax on domestic crude oil has been reduced to Rs 10,500 per tonne from Rs 13,300 per tonne in the fifth fortnightly review, as per the notification. 

While the tax on the export of diesel has been cut to Rs 10 per litre from Rs 13.5 earlier, the levy on export of jet fuel or ATF has been reduced to Rs 5 a litre from Rs 9 in the previous fortnight.  

The price of Brent crude has fallen to a six-month low this month, which has led to reduction in the windfall profit tax.  

Reliance Industries Ltd. and Nayara Energy Ltd., the two private refiners are the main beneficiaries from the reduction in windfall tax on export of diesel, while Oil and Natural Gas Corp., and Vedanta Ltd.’s Cairn Oil and Gas, will benefit from reduction in levy on domestic crude oil production. 

The basket of crude oil that India buys has averaged $92 per barrel in September as against $97 in the previous month, as per Petroleum Planning and Analysis Cell data.

India first imposed windfall profit taxes on July 1 to tax the huge profits of oil companies. However, prices have cooled since then, bringing down the profit margins of both crude producers and refiners. 

Export duties of Rs 6 per litre were levied on petrol and aviation turbine fuel and Rs 13 a litre on diesel. 

A Rs 23,250 per tonne windfall profit tax on domestic crude production was also levied. However, since then, the duties have been adjusted in the last four rounds.