Centre slashes windfall tax on domestic crude oil, increases on ATF export

The Centre has increased the special additional excise duty, commonly known as windfall tax on the export of aviation turbine fuel (ATF) and diesel. The new rates will be effective November 2. However, it reduced taxes on domestically produced crude oil amid fear of slowing fuel demand as China put extensive Covid curbs.

According to the government notification on Tuesday evening, it lowered the tax on domestically produced crude oil to Rs 9,500 per tonne from the current Rs 11,000 per tonne.

At its seventh fortnightly review, the government hiked the tax on the export of ATF to Rs 5 per litre from Rs 3.50. 

Similarly, the windfall tax on the export of diesel has been increased from Rs 12 per litre to Rs 13 per litre (Rs.11.50 + Rs1.50 per litre regulated investment company).

The windfall tax is a special tax imposed by a government on a company or industry when it benefits from something but not responsible for the financial gain that ensues is called windfall profits.

On October 16, the government increased the windfall profit tax on domestic crude, diesel and ATF, following the OPEC + decision of cutting oil production. 

It had hiked tax on domestically produced crude oil to Rs 11,000 per tonne from Rs 8,000 per tonne. Also levied a tax on the export of ATF to Rs 3.50 per litre from nil. 

India first imposed windfall profit tax on July 1, joining a growing number of nations that taxed super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.