Centre Slashes Windfall Tax on Oil Exports, Eases Duties Amid Global Price Dip

New Delhi: Aligning with the downward trend in international oil prices, the Centre on Thursday announced a reduction in the windfall profit tax on domestically produced crude oil and diesel exports. However, the levy on the export of jet fuel or aviation turbine fuel (ATF) and petrol will continue to be zero. The new tax rates came into effect from Thursday, according to a government notification.

As per the notification, the tax imposed as special additional excise duty or SAED on crude oil has been lowered from Rs 9,800 per tonne to Rs 6,300 per tonne, while, the SAED on diesel exports from Rs 2 per litre to Re 1 per litre. At the last revision effective from November 1, the government had increased the tax on crude oil to Rs 9,800 per tonne from Rs 9,050 per tonne. Simultaneously, the levy on the export of diesel was halved to Rs 2 and that on jet fuel was brought to nil from Re 1 per litre.

International oil prices have softened since the last revision, necessitating the reduction. The basket of crude oil that India imports has averaged $84.78 per barrel this month as against $90.08 a barrel average in the month of October and $93.54 in September.

India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel. Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.