Windfall profit tax hiked on export of diesel, cut on domestic crude oil

The government hiked the windfall profit tax on Thursday on the export of diesel to Rs 7 per litre, but slashed the levy on domestically produced crude oil. The government also brought back a tax on jet fuel exports. 

The windfall profit tax was increased to Rs 7 per litre from Rs 5 per litre on the export of diesel. The government also brought a Rs 2 per litre tax on ATF exports in the fortnightly review, the Ministry of Finance said in a notification.  

This comes after the government scrapped windfall profit tax on ATF earlier this month. 

Tax on domestically produced crude oil has been cut to Rs 13,000 per tonne from Rs 17,750 per tonne. 

The tax on exports was raised as margins rose, but tax on domestically produced oil was reduced as international oil prices dipped to a six-month low. 

Windfall taxes are levied by nations on supernormal profits of energy companies. India first imposed windfall profit tax on July 1, but international oil prices cooled down since, eroding profit margins of both oil producers and refiners. The government hence, decided to scrap windfall profit tax on ATF.

On July 1, export duties of Rs 6 per litre (USD 12 per barrel) were levied on petrol and ATF and a Rs 13 a litre tax on the export of diesel (USD 26 a barrel). A Rs 23,250 per tonne windfall profit tax on domestic crude production (USD 40 per barrel) was also levied.

Following that, in the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped, and the tax on the export of diesel and jet fuel (ATF) was cut by Rs 2 per litre each to Rs 11 and Rs 4, respectively. The tax on domestically produced crude was also cut to Rs 17,000 per tonne.

Thereafter, on August 2, the export tax on diesel was cut to Rs 5 a litre and that on ATF scrapped, following a drop in refinery cracks or margins. But the levy on domestically produced crude oil was raised to Rs 17,750 per tonne in line with a marginal increase in international crude prices.

At the third fortnightly review, the taxes on fuel exports were raised but that on domestically produced crude oil was cut.

According to PTI, industry sources said the government is working on a principle to leave some healthy margins, with both crude oil producers and refiners and taxing gains over and above that. 

(With PTI inputs)

Also read: Explained: What is windfall tax? Why has the govt reduced it on fuel exports?