New Delhi: In order to control the prices of petroleum products in the domestic market, the government imposed windfall tax on their exports on July 1. The government has now cut it. A windfall tax of Rs 6 per liter was imposed on the export of petrol and ATF, while a tax of Rs 13 per liter was imposed on the export of diesel. Also, excise duty of Rs 23,230 per tonne was imposed on domestic crude.
In view of the recent fall in international crude oil prices, the government has reduced windfall tax on export of diesel and aviation fuel by Rs 2 per liter, while on export of petrol by Rs 6 per liter. The levy has been completely abolished. Along with this, the tax on the export of domestic crude has been reduced by 27 percent to Rs 17,000 per tonne. After the government’s imposition of widow tax and now removing this tax, this tax is in a lot of discussion. Let us know what is windfall tax and why does the government impose it?
What is windfall tax?
Windfall tax is levied on such companies or industries, which make immediate substantial gains in certain circumstances. Indian oil companies are a good example of this. International crude oil prices rose after Russia’s attack on Ukraine. Oil companies got a lot of benefit from this. Oil companies were reaping huge profits due to the Russo-Ukraine war, so windfall tax was imposed on them. Not only India, Italy and UK also imposed this tax on their energy companies.
Who will benefit from the removal of windfall tax?
Reliance Industries, Oil India and Vedanta Limited will benefit from the windfall tax cut. Apart from these, Russia’s Rosnfeet Baked Naira Energy will also benefit, which operates a 20 million tonne annual refinery in Gujarat. Experts say that Reliance Industries will benefit the most. The company has two oil refineries in Gujarat. One of these is used only for export.
With the imposition of windfall tax on July 1, the cess on domestic crude oil increased to Rs 23,250 per tonne. The effect of increasing the cess was on the margins of the companies. Now by cutting windfall tax, the government has brought down the cess of Rs 23,250 per tonne on companies to Rs 17,000 per tonne, after which the margins of the companies have increased.
Impact on the exchequer
The government was expected to get Rs 69,000 crore annually from crude oil producers like Oil and Natural Gas Corporation, Oil India Limited and Vedanta due to increase in windfall tax. Had the windfall tax remained in place till March 31, 2023, the government would have received about Rs 52,000 crore in the remaining nine months of the current financial year. Now the way the government has reduced its tax and cess, it will have a great impact on the government’s earnings.
