India raises windfall tax on crude by Rs 1,000; removes taxes on diesel, ATF

Windfall tax: India has sharply raised the windfall profit tax on crude oil to Rs 2,300 per tonne from Rs 1,300. However, New Delhi removed the tax on diesel and aviation turbine fuel, and it will also continue with no windfall taxes on petrol

The windfall tax on diesel, ATF have been removed, as against windfall taxes of 50 paise per litre and one rupee per litre earlier.

The new rates are effective from January 2, 2024.

On December 18, the tax, levied in the form of Special Additional Excise Duty or SAED, on domestically produced crude oil was cut to Rs 1,300 per tonne from Rs 5,000 a tonne. Further, the SAED on the export of diesel was reduced to 50 paise per litre from Rs 1 a litre.

India first imposed windfall profit taxes on July 1, 2022,, joining a growing number of nations that tax supernormal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above USD 75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above USD 20 per barrel.