Shares of Oil and Natural Gas Corporation Ltd (ONGC) gained more than 3 percent on May 2 after the government reduced windfall tax on crude oil to Rs 4,100 from Rs 6,400 per tonne earlier.
The government has left the windfall tax on petrol, diesel and aviation turbine fuel at zero. The revised duty will be effective from May 2, according to a notification issued by the Central Board of Indirect Taxes and Customs.
The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks. Last month, the government had cut the windfall tax on petroleum crude to zero from Rs 3,500 per tonne previously with levy for diesel being cut to Rs 0.50 per litre from Rs 1. The levy on crude was hiked to Rs 6,400 per tonne on April 19.
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The windfall profit tax refers to the difference between the price that producers receive above a certain threshold. The objective of the tax was to offset the reduction in excise duty on petrol and diesel, providing relief to consumers. However, the reduction in the windfall cess from its initial levels is expected to decrease the government's earnings.
From July 1, 2022 onwards, India has implemented the windfall profit tax, following the trend of an increasing number of nations that impose taxes on the super normal profits of energy companies. While export duties were imposed on petrol, diesel and jet fuel (ATF), domestically produced crude oil was subjected to a Special Additional Excise Duty (SAED). Additionally, export duties of Rs 6 per litre on petrol and ATF and Rs 13 a litre on diesel were introduced by New Delhi.
At 10.26am, the scrip was trading 2.8 percent higher on the National Stock Exchange at Rs 163.40 with benchmark Nifty trading 0.49 percent higher at 18,153.40 points.