Windfall tax on domestic crude cut to Rs 5,700 per tonne

The Government on India has reduced the windfall gains tax on domestically produced crude oil to Rs 5,700 per tonne from the earlier figure of Rs 8,400 per tonne. The new rate came into effect from Thursday, May 16, 2024, in accordance to an announcement by the Central Board of Indirect Taxes and Customs, or CBIC. 

This is the second time in the month of May that the Centre has cut the windfall gains tax on domestic crude. On May 1, the government had brought down the windfall tax to Rs 8,400 per metric ton from Rs 9,600 per tonne, effective Wednesday as part of a fortnightly revision. A month ago, on April 16, the Centre had hiked the windfall tax on petroleum crude to Rs 9,600 per metric ton from Rs 6,800 per tonne, owing to a steep rise in oil prices last month.

The Centre’s latest decision to slash crude prices should have an obvious positive impact on the upstream oil exploration and production companies Oil India Limited (OIL) and Oil and Natural Gas Corporation (ONGC), which will now have to pay lesser tax on the commodity. The lowering of windfall gains tax was necessary because the upstream oil companies have lately been witnessing a slump in crude oil prices.

The windfall tax on crude oil was introduced in July 2023 after a sudden rise in prices had marked a significant hike in the revenues of oil companies. The government, in turn, spotted an opportunity to reduce fiscal deficit by taxing the profits of these upstream organisations.

The windfall tax started covering the export of diesel, petrol and aviation fuel, too, once private refineries began recording considerable profits by selling fuel in the foreign markets. There will, however, be no export duty on petrol, diesel and aviation turbine fuel for now.