The government has increased the Windfall tax burden on oil companies producing crude oil which are making huge profits from exports. The government has increased the tax on petroleum crude. This comes after surge in global crude oil prices.
What is Windfall tax?
A windfall tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits. “Windfall” refers to a sudden increase in profits while “tax” indicates a levy imposed on this dramatic income increase.
New tax rate
Earlier, the government had decided to increase the special additional excise duty on domestically produced crude oil from October 18, 2023. In 2022, the government had decided to impose a windfall tax on crude oil producing companies which were making huge profits after the rise in crude oil prices after the Russia-Ukraine war.
The central government issued a notification saying that the windfall tax on export of petroleum crude has been increased to Rs 9800 per tonne, which was earlier Rs 9050 per tonne.
How oil companies making profit
Due to the war between Russia and Ukraine, the private oil refinery companies were importing crude oil cheaply from Russia. After refining it, they were selling petrol, diesel and aviation fuel abroad at higher prices and making huge profits.
Windfall tax on the export of ATF
Private oil refinery companies selling more petrol and diesel abroad due to which fuel crisis had arisen in many states of the country. At the same time, these companies are also profiting from the export of domestic crude oil. Due to which the government had decided to impose windfall tax on these companies.
Why government has decided to increase windfall tax
The windfalltax on the export of Air Turbine Fuel i.e. ATF has been reduced to zero, it has been decided to reduce the tax on diesel. The tax on ATF has been reduced from the current Re 1 per liter to zero. Whereas it has been decided to reduce the tax on export of diesel from Rs 4 per liter to Rs 2 per liter. The new rates will be applicable from November 1, 2023.