The government has made changes to the windfall tax on domestic crude oil production to simplify the tax system and encourage investments. The revised tax rate is now set at ₹6,400 per tonne.
A windfall tax is a type of tax that the government imposes on certain industries when they make unexpectedly high profits.
The government has raised the Special Additional Excise Duty (SAED) on crude petroleum from zero to ₹6,400 per tonne. This increase will not affect the SAED on petrol and Aviation Turbine Fuel (ATF), which will remain at zero.
The government has also eliminated the export duty on diesel, resulting in the SAED on diesel decreasing from ₹0.50 per litre to zero.
The government's revision of the windfall tax on crude oil production is anticipated to increase its revenue. This change will impact oil companies as they will now be required to pay a higher tax on the sale of domestically produced crude oil. Conversely, the elimination of the export duty on diesel is likely to provide relief to the manufacturing sector, which relies heavily on diesel for power generation and transportation.
Last year, the government introduced a windfall tax in response to the surge in crude oil prices following the Russia-Ukraine conflict.
As a result of this unforeseen increase in earnings, oil producers obtained significant profits, which were categorized as windfall gains, and the government began imposing taxes on these additional earnings.
According to officials, the government regularly reviews the tax rates every two weeks to ensure that the tax collection is appropriate. They also mentioned that the tax rates only partially offset the additional profits that companies generate during times of high prices in the global market.
Windfall tax on domestic crude to ₹6,400, eliminates diesel export duty | Mint - Mint
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