On Monday, the Government of India announced a reduction in the windfall tax on petroleum crude from Rs 2,300 a tonne to Rs 1,700 a tonne, as per an official notification. The revised tax rate will come into effect from January 16.
Earlier this month, the government had announced an increase in the windfall tax applied to domestically produced crude petroleum, from Rs 1,300 to Rs 2,300 per tonne.
Implemented in July 2022, India introduced its first windfall tax, extending its application to encompass producers of crude oil and introducing taxation on exported gasoline, diesel, and aviation fuel. The tax is activated when global benchmark rates surpass $75 per barrel for domestically produced crude oil.
The decision to periodically reassess and modify tax rates every fortnight is based on the examination of average oil prices observed in the preceding two weeks. This procedural approach provides the government the flexibility to readjust the tax structure in response to dynamic shifts in market conditions and fluctuations in commodity prices.
A windfall tax is an increased tax imposed by the government on particular industries that encounter unforeseen and higher-than-usual profits.