Wed. Sep 27th, 2023
    Centre Increases Windfall Tax on Domestic Crude Oil Sales

    The Indian government has decided to raise the windfall tax on the sale of domestic crude oil from ₹6,700 per tonne to ₹10,000 per tonne. This increase comes into effect from September 16, 2023. The Ministry of Finance has also announced a reduction in the special additional excise duty (SAED) on the export of diesel, from ₹6 to ₹5.50 per litre, and on jet fuel, from ₹4 to ₹3.50 per litre. However, the additional duty on the export of petrol will remain unchanged at zero.

    The windfall tax was initially introduced on July 1, 2022, in response to the high profits generated by oil exploration and producing companies during a period of elevated crude oil prices following Russia’s invasion of Ukraine. Private refiners were also selling petroleum products abroad to take advantage of better international prices, rather than catering to domestic demand.

    The increase in the windfall tax coincides with a rise in crude oil prices, which are currently above $90 per barrel, with Brent crude trading at around $93.7 per barrel. Supply concerns have emerged as OPEC+ has implemented supply cuts, and both Saudi Arabia and Russia have announced voluntary production reductions. Additionally, the upcoming winter season and heating requirements are expected to contribute to higher demand and potentially keep prices elevated.

    The International Energy Agency has warned that the output cuts may deplete oil inventories for the remainder of 2023, leading to even higher prices. However, global economic headwinds are expected to limit demand growth in 2024.

    Source: Mint
    – Windfall tax: a tax imposed on unexpectedly high profits or gains, typically in industries such as oil, gas, or mining.
    – Excise duty: a tax imposed on the production or sale of specific goods within a country.

    Source: Own knowledge