Govt cuts windfall profit tax on domestic crude oil, diesel; scraps for ATF

The government cut the windfall profit tax on locally-produced crude oil and diesel on Saturday (October 1), in line with a fall in international rates, and scrapped the levy on the export of jet fuel with effect from October 2.

At the sixth fortnightly review, the government reduced the tax on domestically-produced crude oil to ₹8,000 per tonne from ₹10,500 per tonne.

The levy on the export of diesel was reduced to ₹5 per litre from ₹10 per litre.

Also read: FM defends windfall tax on crude, oil product exports

The tax at the rate of ₹5 a litre on Aviation Turbine Fuel (ATF) exports was scrapped with effect from October 2, according to a finance ministry notification issued late Saturday night.

The reduction in the tax rates follows the easing of crude oil prices in international markets.

While private refiners Reliance Industries Limited and Rosneft-based Nayara Energy are the principal exporters of fuels like diesel and ATF, the windfall levy on domestic crude targets producers like state-owned Oil and Natural Gas Corporation (ONGC) and Vedanta Limited.

Also read: Windfall tax: Government gets the rationale terribly wrong

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

Export duties of ₹6 per litre ($12 per barrel) were levied on petrol and ATF and ₹13 a litre ($26 a barrel) on diesel.

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

Also read: Windfall tax to recover ₹1 lakh crore revenue lost in excise cuts on fuel: Report

The duties were partially adjusted in the previous five rounds on July 20, August 2, August 19, September 1 and September 16 and were removed for petrol.