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EconomyWindfall profit tax hike explained

Windfall profit tax hike explained

When it began, a windfall profit tax on the export of petrol alongside those of diesel and ATF was levied too, but the tax on petrol was scrapped subsequently

The union government has hiked the windfall profit tax on domestically produced crude oil while reducing the tax rate applicable to the of diesel. The change is effective from today i.e. 17 November, a government notification said, mentioning that the tax on crude oil produced by firms such as state-owned Oil and Natural Gas Corporation (ONGC) had been increased to Rs 10,200 per tonne from Rs 9,500 per tonne.

What is windfall profit tax?

The windfall profit tax is levied as special additional excise duty, aimed at absorbing the super-profits earned by domestic crude oil producers and is revised every fortnight. While the windfall profit tax is calculated by taking away any that producers are getting above a threshold, the levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between international oil prices realised and the corresponding costs.

When was the windfall profit tax introduced in India?

India first imposed windfall profit taxes on 1 July, joining a growing number of nations that tax super normal profits of energy companies. At that stage, a windfall tax on the of alongside diesel and ATF too was levied. But the tax on petrol was scrapped in subsequent fortnightly reviews.

In July, duties of Rs 6 per litre ($ 12 per barrel) each were levied on and aviation turbine fuel and Rs 13 a litre ($ 26 a barrel) on diesel. A Rs 23,250 per tonne ($ 40 per barrel) windfall profit tax on domestic crude was also levied.

The duties were partially adjusted in the previous rounds on 20 July, 2 August, 19 August, 1 September, 16 September, 1 October, 16 October and 1 November.

What is the latest hike?

In the fortnightly revision of the windfall profit tax, the government cut the rate on exports of diesel to Rs 10.5 per litre from Rs 13 per litre. The levy on diesel includes Rs 1.50 per litre road infrastructure cess.

The tax on jet fuel or ATF, which was set at Rs 5 a litre in the last review on 1 November, has not been altered.

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