A timeline of windfall gains tax implementation in India
2 min read 21 Mar 2023, 06:19 PM ISTIndia implemented windfall profit taxes on July 1 of the previous year, aligning with other countries that tax energy companies' exceptional profits.
PremiumAs per an official notification, the Central Government has reduced the windfall profit tax on diesel exports to a historic low of ₹0.50 per litre and has completely waived it off for ATF or jet fuel. However, the tax on domestically produced crude oil has been slightly raised.
As per media reports, the Windfall tax is a type of excise duty that is imposed on domestic crude oil producers to offset the extra profits they earn as a result of high global crude prices.
As per a report by Reuters, India, the world's third-largest oil consumer, imposed a windfall tax on refined fuel exports last year and mandated that companies sell the equivalent of 50 per cent of their gasoline exports and 30 per cent of their diesel exports domestically in the current fiscal year to March 31.
New Delhi issued the rare restrictions after private refiners Reliance Industries and Nayara Energy, key Indian buyers of discounted Russian supplies, began reaping major profits by aggressively boosting fuel exports instead of domestic sales.
At the time of implementation, crude oil was priced at $113 per barrel. Currently, windfall taxes for crude oil have decreased from Rs. 23,250 per tonne in July 2022 to Rs. 3,500 per tonne as of March 21, 2023, reflecting the trend of Brent Crude Oil prices.
The global banking system's worsening state caused US benchmark Brent crude to drop to $72 per barrel on March 16.
The downward trend was instigated by the failure of Silicon Valley Bank (SVB), which led to the collapse of Signature Bank and other major financial institutions like Silvergate Capital and Credit Suisse.
Earlier this month, the central government increased the windfall tax on domestically produced crude oil from Rs. 4350 per tonne to Rs. 4400 per tonne. At the same time, the government lowered the export duty on diesel to Rs. 0.5 per litre and eliminated it entirely for ATF.
Meanwhile, this tax is updated every two weeks by the central government, and its rates are adjusted based on the current crude prices and refining spread.
In July of last year, the Indian government enforced this tax on crude oil producers and exports of gasoline, diesel, and aviation fuel in response to private refiners looking for foreign markets to benefit from high refining margins instead of selling at lower prices within the country.
A ₹23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied. The export tax on petrol was scrapped in the very first review.
Reliance Industries Ltd, which operates the world's largest single-location oil refinery complex at Jamnagar in Gujarat, and Rosneft-backed Nayara Energy are primary exporters of fuel in the country.
