The Union government on Friday slashed the windfall profit tax on the export of diesel to its lowest of Rs 0.50 per litre and nil on jet fuel (ATF), reported news agency PTI. In an order dated March 3, the tax on the export of diesel was cut to Rs 0.5 per litre from Rs 2.5, and the tax on the export of ATF was cut to nil from Rs 1.50 a litre, the report said.
On the other hand, the levy on domestically produced crude oil was marginally increased. The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has hiked to Rs 4,400 per tonne from Rs 4,350 per tonne, as per PTI.
Crude oil is refined and transformed into fuels like petrol, diesel, and aviation turbine fuel (ATF).
The new tax rates come into effect on March 4. This is the second reduction in rates in the last two weeks. Rates were cut on February 16 as well.
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According to the report, since the tax was implemented in July of last year, the export levy on fuel and ATF is at its lowest level. Every two weeks, the tax rates are adjusted based on the average oil prices in the previous two weeks.
Windfall tax is levied by governments when an industry unexpectedly earns large profits — primarily due to an unprecedented event.
The windfall profit taxes were first imposed on July 1, 2022, as India joined a growing number of nations that tax super normal profits of energy companies. At that time, petrol and ATF attracted export duties of Rs 6 per litre ($12 per barrel) each, and Rs 13 a litre ($26 a barrel) was levied on diesel. A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.
The government levies a tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel.
The export tax on petrol was scrapped in the very first review.
The levy on fuel exports is based on margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.
The seven-month-old windfall profit tax on domestically produced crude oil and export of fuel is likely to give about Rs 25,000 crore in the current fiscal ending March 31 and the levy will continue for now as international oil prices are up again, PTI reported earlier citing top government officials.