Windfall profit tax on export of diesel, domestic crude oil, ATF hiked

The government on Saturday (October 15) hiked windfall tax on domestically produced crude oil by more than a third while doubling the rate on export of diesel and re-introducing the levy on overseas shipment of 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 increased to ₹11,000 per tonne beginning October 16 from ₹8,000, according to a government notification.

In the fortnightly revision of windfall tax, the government doubled the rate on export of diesel to ₹12 per litre from ₹5 a litre.

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

The levy on jet fuel, which was brought down to nil at the beginning of this month, was re-introduced at ₹3.50 a litre. The levy on diesel includes ₹1.50 per litre road infrastructure cess (RIC), as per the notification.

The hike reverses the reduction in two previous rounds in September.

This follows the rise in international oil prices. The basket of crude oil that India imports has risen to $92.91 per barrel in October from an average of $90.71 in the previous month.

The basket had averaged $116.01 in June which was used as a base to introduce the levy for the first time from July 1.

Also read: Govt cuts windfall tax on petrol, diesel, jet fuel, crude oil

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.

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.