Image for representation purpose only.
| Photo Credit: Reuters

The government on November 16 cut the windfall profit tax on crude oil produced in the country and on exports of diesel in line with softening international oil prices.

The tax, levied in the form of Special Additional Excise Duty or SAED, on domestically produced crude oil has been reduced to ₹6,300 per tonne from ₹9,800 per tonne, according to an official notification.

SAED on the export of diesel was reduced to ₹1 per litre from ₹2 per litre.

The levy on the export of jet fuel or aviation turbine fuel (ATF) and petrol will continue to be zero.

The new tax rates came into effect from Thursday.

At the last revision effective from November 1, the government had increased the tax on crude oil to ₹9,800 per tonne from ₹9,050 per tonne. Simultaneously, the levy on the export of diesel was halved to ₹2 and that on jet fuel was brought to nil from ₹1 per litre.

International oil prices have softened since the last revision, necessitating the reduction. The basket of crude oil that India imports has averaged $84.78 per barrel this month as against $90.08 a barrel average in the month of October and $93.54 in September.

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

A ₹23,250 per tonne ($40 per barrel) windfall profit tax on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) was also levied.

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 $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel.

Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.

The levy on domestic crude oil dropped to nil in the first half of April as international crude oil prices fell but was back in the second half in step with a rise in rates.

The levy on diesel became nil in April but the levy was brought back in August. Levy on ATF became nil in March and was brought back in the second half of August.

The export tax on petrol was scrapped in the very first review.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel (ATF).

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.

By admin

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *