Govt cuts windfall profit tax on domestic crude oil to Rs 13,000 per tonne

The government on late Thursday increased windfall profit tax on diesel export to Rs 7 per litre from Rs 5 per litre earlier. Besides, the government again imposed Rs 2 per litre tax on export of aviation turbine fuel after scrapping it earlier this month.

The new changes will come into effect from August 19.

The Central Board of Excise and Customs (CBIC), in its notification, has however reduced the windfall tax on domestically produced crude oil to Rs 13,000 a tonne from Rs 17,750 a tonne earlier, a move that will come as a relief for producers like ONGC and Vedanta Ltd.

This is the third round of the revision of the newly-introduced windfall tax. However, the levy on export of petrol remains nil. The revision comes at a time when international oil prices have slid to below $90 per barrel, a six-month low.

India first imposed windfall profit tax on July 1, joining a growing number of nations that taxed super normal profits of energy companies. But international oil prices have cooled since then, eroding profit margins at both oil producers and refiners.

Thereafter, in the first fortnightly review on July 20, the Rs 6 a litre export duty on petrol was scrapped, the tax on the export of diesel and jet fuel was cut by Rs 2 per litre each to Rs 11 and Rs 4, respectively. The tax on domestically produced crude oil was also cut to Rs 17,000 per tonne.

On August 3, government had increased the windfall tax on domestically produced crude to Rs 17,750 a tonne from Rs 17,000 a tonne earlier. However, the export tax on diesel and aviation turbine fuel was lowered, in line with softening international petroleum product prices.

During the second revision, it had also cut the levy on diesel to Rs 5 per litre from Rs 11 per litre earlier. In addition, it also scrapped Rs 4 per litre tax on export of aviation turbine fuel.

The new tax was imposed after the domestic companies were seen to be making huge profits since global oil prices have shot up amid geopolitical turmoil.

While introducing the new levies, the government had said that it will review exports and imports of these items every fortnight to amend its decision.

The reduction in taxes earlier this month came as India’s trade gap swelled to a record high in July as elevated commodity prices and a weak rupee inflated the country’s import bill.

The gap between exports and imports widened to $31.02 billion in July from $26.18 billion in June. This, as a result of exports falling and elevated commodity prices together with a weak rupee, are inflating the import bill. Imports jumped 43.59% in July from the year-ago month, while exports dropped 0.76%.

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