India cuts all windfall tax on crude
The government has cut windfall tax on crude oil from ₹3,500 per tonne to nil effective from Tuesday and and halved the tax on diesel to 0.5 rupee per litre, reported Reuters citing a government notification on Tuesday, while the windfall tax on exports of aviation turbine fuel (ATF) and petrol, which had previously been cut to zero, were left unchanged.
India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax super normal 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 (USD 26 a barrel) on diesel. A ₹23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.
The government levies tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel. The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.
Reliance Industries Ltd (RIL), 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.
Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels such as petrol, diesel and ATF. The government reviews the tax rates every fortnight to calibrate the tax mop-up.
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(With inputs from agencies)