Govt cuts windfall profit tax on crude oil, hikes levy on export of diesel, jet fuel

The government on Tuesday cut windfall tax on domestically produced crude oil while increasing the rate on export of diesel and jet fuel (ATF) in line with rise in international oil prices.

The tax on crude oil produced by firms such as state-owned Oil and Natural Gas Corporation (ONGC), was cut to ₹9,500 per tonne from ₹11,000, beginning November 2, a government notification showed.

In the fortnightly revision of windfall tax, the government hiked the rate on export of diesel to ₹13 per litre from ₹12 per litre.

The levy on jet fuel too was increased to ₹5 a litre, from ₹3.50. The levy on diesel includes ₹1.50 per litre road infrastructure cess (RIC), the notification showed.

When the levy was first introduced, a windfall tax on export of petrol alongside diesel and ATF too was levied. But the tax on petrol was scrapped in subsequent fortnightly reviews.

While the windfall profit tax is calculated by taking away any price 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 of international oil price realised and the cost.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies.

At that time, export duties of ₹6 per litre (USD 12 per barrel) each were levied on petrol and aviation turbine fuel and ₹13 a litre (USD 26 a barrel) on diesel.

A ₹23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.

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