Tax revision. Windfall profit tax on crude oil hiked, levy on export of diesel cut

The government on Wednesday hiked windfall tax on domestically produced crude oil while reducing the rate on export of diesel.

The tax on crude oil produced by firms such as state-owned Oil and Natural Gas Corporation (ONGC), was hiked to ₹10,200 per tonne, from ₹9,500 per tonne, with effect from November 17, a government notification said.

In the fortnightly revision of windfall tax, the government cut the rate on export of diesel to ₹10.5 per litre, from ₹13 per litre. The levy on diesel includes ₹1.50 per litre road infrastructure cess.

The export tax on jet fuel or ATF, which was set at ₹5 a litre in the last review on November 1, has not been altered.

When the levy was first introduced, a windfall tax on export of petrol alongside diesel and ATF too was levied. But the tax on petrol was scrapped in subsequent fortnightly reviews.

While the windfall profit tax is calculated by taking away any price that producers are getting above a threshold, the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference of international oil price realised and the cost.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of ₹6 per litre ($12 per barrel) each were levied on petrol and aviation turbine fuel and ₹13 a litre ($26 a barrel) on diesel. A ₹23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.

The duties were partially adjusted in the previous rounds on July 20, August 2, August 19, September 1, September 16, October 1, October 16 and November 1.

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