Govt reduces windfall tax on domestic oil producers as global prices drop

The government on Wednesday reduced the windfall tax on exports of domestically produced crude oil, diesel and aviation turbine fuels (ATF) and withdrew tax on petrol as international oil prices softened, but no relief was given to consumers.

In a government notification effecting changes in windfall tax rates on various petroleum products late on Tuesday night, the Center said it had made these amendments in its earlier decision of June 30 “being satisfied that it is necessary to do so in the public interest”.

As per the notification, windfall tax on crude oil has been reduced from 23,250 per tonne 17,000 per tonne from Wednesday. The levy imposed as export duty on diesel has been reduced 13 per liter 10 and from ATF 6 per liter 4 liters.

“The tax on petrol exports has been completely withdrawn as most private petrol pumps are now selling the fuel domestically after a significant reduction in its price in the international market,” said a person aware of the development, requesting anonymity.

The government imposed a windfall tax on exports from oil refineries and producers from July 1, announced the taxes. 6 per liter of petrol. 13 per liter of diesel, and 23,250 on each tonne of domestically produced crude oil in a decision aimed at boosting local supply and boosting its revenue.

The Union Finance Ministry had earlier explained the rationale for introducing the new tax after it saw domestic companies making “abnormal” profits as oil prices rose in global markets due to geopolitical turmoil.

On that day, the customs duty on gold was increased from 10.75% to 15% due to a significant rise in imports. According to official data, gold imports surged 789% year-on-year to $6.03 billion in May this year, a major drag on foreign exchange reserves.

The new levies — a windfall tax on the petroleum sector and an increase in customs duty on gold — came into effect from July 1 and the government said it would review exports and imports of these items every fortnight to amend its decision if necessary. HT first reported the plan to levy the windfall tax on May 27.

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