The government has reduced windfall tax on domestically-produced crude oil to Rs 3,250 per tonne from Rs 5,200, with effect from Saturday.
The tax is levied in the form of Special Additional Excise Duty (SAED). SAED on export of diesel, petrol and jet fuel or ATF, has been retained at 'nil'.
The new rates are effective from June 15, an official notification said.
India first imposed windfall profit taxes on July 1, 2022, joining a host of nations that tax supernormal profits of energy companies.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
What is windfall tax?
A windfall tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits. As the name suggests, “windfall” refers to a dramatic and unanticipated increase in profits. On the other hand, “tax” implies an imposition levied on this dramatic income growth.
The government imposes this tax when they notice a sudden rise in an industry’s revenue. For instance, the recent Russia-Ukraine war benefitted oil and gas industries with a sudden rise in their profit. So, the government imposed a windfall tax on these industries.
These profits cannot be attributed to something the company was actively involved in, like its business expansion or strategy. Hence, when industries experience massive growth in their income due to external incidents that they are not responsible for, a Windfall Tax is levied on their earnings.
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