Govt cuts windfall gain tax on crude, export duty on fuels  

The Government has lowered windfall gain tax on crude oil and Special Additional Duty on exports of petrol and diesel. Though, it will not have any impact on the retail prices for consumers, but it will benefit domestic crude producers and oil refiners. These were hiked on July 01.

Finance Ministry had said that these will be reviewed every fortnight and a decision will be taken. As the prices of crude and petro products in global market have softened and supply of petrol and diesel too improved in domestic market, government has revised levies.

On Wednesday, share prices of Reliance Industries, ONGC, Oil India and Vedanta surged by 2.4 per cent, 4 per cent, 5.8 per cent and 6.2 per cent, respectively. These are involved in production and refining.

In a set of four notifications, the Central Board of Indirect Taxes & Custom (CBIC) says these seek “to reduce the Road and Infrastructure Cess on export of petrol, to exempt the excisable goods, namely petrol, diesel and Aviation Turbine Fuel from Special Additional Excise Duty and Road and Infrastructure Cess when exported from units located in the Special Economic Zones (SEZ), to reduce the Special Additional Excise Duty on production of petroleum crude and export of Aviation Turbine fuel and to reduce the Special Additional Excise Duty on exports of petrol and diesel.”

Accordingly, windfall gain on domestically produced crude will now be ₹17,000 a tonne against ₹23,250 per tonne. Also, Special Additional Excise Duty (SAED) on exports of Aviation Turbine Fuel (ATF) reduced to ₹4 a litre from ₹ 6 a litre and on diesel to ₹10 a litre from ₹12. Export of diesel will continue to have an additional excise duty of ₹1. On petrol, such a duty of ₹6 a litre has been removed. It has also been decided to exempt petrol, diesel and ATF from SAED, if exported from units located in the Special Economic Zone (SEZ).

The decision to impose tax on windfall gain was taken after sharp rise in crude prices in recent months. The domestic crude producers sell crude to domestic refineries at international parity prices. As a result, the domestic crude producers are making windfall gains. Taking this into account, a cess was imposed on crude. Import of crude would not be subject to this cess.

The government has already clarified that this cess will have no adverse impact, whatsoever, on domestic petroleum products/fuel prices. Further, small producers, whose annual production of crude in the preceding financial year is less than 2 million barrels are not required to pay this cess. Also, to incentivise an additional production over preceding year, no cess has be imposed on such quantity of crude that is produced in excess of last year production by a crude producer.

“This measure would not impact crude prices or the prices of petroleum products and fuels,” Finance Ministry said.

On making export of petrol and diesel costlier, the Ministry had said while crude prices have increased sharply in recent months, the prices of diesel and petrol have shown a sharper increase. The refiners export these products at globally prevailing prices, which are very high. As exports are becoming highly remunerative, it has been seen that certain refiners are drying out their pumps in the domestic market, it said while justifying cesses imposed on petrol and diesel. Now, this will continue on diesel as that has very high consumption.

“These measures would not have any adverse impact on domestic retail prices of diesel and petrol. Thus, domestic retail prices would remain unchanged. At the same time these measures will ensure domestic availability of the petroleum products,” the ministry had said.

COMMENT NOW