In a significant development, the Indian government has provided much-needed relief to oil companies by adjusting the windfall tax rates. The special additional excise duty on crude oil, which was previously set at Rs 7100 per tonne, has been reduced to Rs 6700 per tonne. This change was officially announced through a notification issued on Friday, September 1, and it came into effect on September 2.
Government’s Relief Measures
However, the government has also increased the windfall tax on the export of diesel. The rate has been raised from Rs 5.50 per litre to Rs 6 per litre. Additionally, the duty on jet fuel used in airplanes has seen a significant hike, going from Rs 2 per liter to Rs 4 per liter.
Tax Hikes on Diesel and Jet Fuel
These tax rates are determined based on the average price of oil over a two-week period. Windfall profit tax was initially introduced in India on July 1 of the previous year. India joined the ranks of countries where energy companies are required to pay taxes on profits exceeding the norm. Any revenue that oil companies generate above $75 per barrel is classified as windfall profit and is subject to windfall tax. The tax on oil exports is imposed based on cracks or margins, which essentially represent the difference between international oil prices and production costs.
Crude Oil Tax Reduction
Notably, Indian-origin Tharman Shanmugaratnam has been elected as the President of Singapore with an impressive 70 percent of the votes cast.
It is estimated that the Indian government will accrue approximately Rs 40,000 crore in the financial year 2023 through the special additional excise duty imposed on crude oil production and the export of petroleum products, starting from July 1, 2022. Earlier this year, in May, the government had temporarily suspended the windfall tax on crude oil due to surging global crude prices but has now reinstated it.
