Centre Slashes Windfall Tax On Domestic Crude

The windfall tax on sales of locally produced crude oil has been lowered by the union government to $13,000 per tonne. The sale of Indian-produced crude oil has been subject to an extra levy of $17,750 per tonne for the past two weeks. The cess on the export of aviation turbine fuel (ATF) has also been reduced by the Center to $2 per litre. ATF shipments have not been subject to the cess for the last two weeks. 

The special additional excise duty on diesel export has been raised from $5 to $6 per litre, and it would be $7 per litre with a cess. Without the imposition of the windfall tax, the export of gasoline would continue. The new rates go into effect on August 19th. On July 1, the Center imposed export taxes of $6 per litre on gasoline and ATF and $13 per litre on diesel. On the sale of domestic crude, there was a windfall tax of 23,250 per tonne. 

The first review of the taxes took place on July 20. At that time, the 6-cent-per-liter duty on gasoline exports was eliminated, and the 11- and 4-cent-per-liter taxes on diesel and aviation turbine fuel (ATF) were cut. On July 20, the tax on domestically produced crude was lowered to 17,000 per tonne. 

After the tax was imposed on July 1st, Revenue Secretary Tarun Bajaj had stated that it will be reassessed every 15 days taking into account the foreign exchange rate and worldwide crude prices.The government first enacted windfall taxes on July 1 in response to huge profits made by oil and gas corporations as a result of rising energy prices brought on by the conflict between Russia and Ukraine. Prices for the crude that domestic producers sell to refiners are based on market rates abroad. Since February until a month ago, the benchmark Brent crude prices have been generally at multi-year high levels. Fears of a recession have caused crude prices to recently decline and drop to 6-month low levels. The Intercontinental Exchange's October Brent contract was trading at $96.09 per barrel as of the time the story was written, up 2.61% from the previous close.