How much is the windfall tax?
The central government on Tuesday reduced the windfall tax on crude oil from Rs 3,500 per tonne to Rs 0 i.e. zero, which had been in force for 9 months.
Along with this, the windfall tax on diesel has been reduced from Rs.1 to Rs.0.5 per litre.
This follows months of absence of windfall tax on petroleum and jet fuel.
Critical period
The central government has scrapped the windfall tax amid rising global crude oil prices after the world’s top crude producers decided to cut output by 1.16 million barrels per day from May this year.
What is a windfall tax?
Windfall tax is practiced not only in India but also in many countries of the world. A windfall tax is a tax levied by the government to obtain additional tax revenue from a particular company or industry when there is a sudden excess of profits. It was announced in July 2022.
What is the reason for imposing
As India’s trade deficit widened to an all-time high, the rupee depreciated as crude oil imports surged. All this was imposed by the central government through windfall tax.
Vedanta Group
India’s leading mining giant Vedanta Group has withheld about $91 million it owes the government in revenue from its oil and gas fields to offset an additional tax measure.
Reliance Industries
In January this year, Reliance Industries posted a bigger-than-expected fall in its profit for the December quarter, which management attributed to windfall tax on fuel exports.
Who is the target?
The windfall tax on crude oil targets crude producers Reliance Industries Ltd, Rosneft-backed Nayara Energy, Vedanta and state-run ONGC. These companies only manufacture and export to foreign countries.
Who benefits?
Now that the windfall tax on crude oil has been completely abolished, fuel exporters in India will be able to increase their profits on their exports.
With this, Reliance Industries, Nayara Energy and Vedanta Group are likely to get additional profits.
9 months taxation period
India first imposed windfall tax on crude oil producers in July 2022. The windfall tax on crude oil has come down to Rs 3,500 per tonne as on March 21 this year from Rs 23,250 per tonne in July 2022. It is now completely cancelled.