The central government has increased the seven-month-old windfall profit tax, which is applied to domestically produced crude oil and the export of diesel and aviation turbine fuel, in response to the stabilisation of global oil prices, according to an official statement issued on February 3rd.
The notice indicates that the tax on crude oil produced by companies like Oil and Natural Gas Corporation (ONGC) has been raised to ₹5,050 per tonne from its previous rate of ₹1,900 per tonne.
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Crude oil extracted from the earth and the seabed is processed into fuels such as gasoline, diesel, and aviation turbine fuel. The central government has also increased the tax on the export of diesel to ₹7.5 per litre from ₹5 and the tax on international shipments of aviation turbine fuel to ₹6 per litre from ₹3.5 per litre.
The revised tax rates went into effect on February 4th, Saturday. The tax on both domestic crude oil and fuel exports has now been raised from its recent low.
High-ranking government officials have stated that the windfall profit tax on domestically produced crude oil and fuel exports is estimated to generate approximately ₹25,000 crore during the current fiscal year ending on March 31, 2023.
The tax will remain in place as global oil prices have risen again, according to an official quoted by PTI.
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During the last bi-weekly review on January 17th, the tax rates were reduced due to the decline in global oil prices. However, since then, global oil prices have stabilised, leading to an increase in the windfall tax.
The country first introduced the windfall profit tax on July 1st of last year, aligning with an increasing number of countries that impose taxes on excessive profits of energy companies.
During that period, the government imposed a tax of ₹6 per litre ($12 per barrel) each on gasoline and aviation turbine fuel and ₹13 per litre ($26 per barrel) on diesel. They also instituted a windfall profit tax of ₹23,250 per tonne ($40 per barrel) on domestic crude oil production.
However, in the first review, the export tax on gasoline was abolished. The tax rates are re-evaluated every two weeks based on the average oil prices from the preceding period.
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Reliance Industries, which operates the largest single-location oil refinery complex in the world at Jamnagar in Gujarat, and Nayara Energy, backed by Rosneft, are the primary fuel exporters in India.
The central government imposes a tax on windfall profits made by oil producers on any price above a threshold of $75 per barrel.
The tax on fuel exports is determined based on the cracks or margins earned by refiners on overseas shipments. These margins are primarily the difference between the international oil price and the cost.