WINDFALL TAX

Why in News:

India reimposes windfall tax on petroleum crude after two months

Important Points:

The Indian government has reimposed a windfall tax on domestic petroleum crude according to a government notification. The Special Additional Excise Duty (SAED) on crude petroleum is raised to Rs 1600/per metric tonne, from nil.

Notification added that the government has left the windfall tax on diesel, petrol and aviation turbine fuel unchanged at zero. India had cut the windfall tax on petroleum crude to zero from Rs 4,100 per tonne in may 2023.

India earlier had imposed the windfall tax on crude oil producers and extended the levy on exports of gasoline, diesel and ATF, joining a growing number of nations that tax super normal profits of energy companies.

While duties were slapped on the export of petrol, diesel and jet fuel (ATF), a Special Additional Excise Duty (SAED) was levied on locally produced crude oil.

The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks.

Windfall profit tax is calculated by taking away any price that producers are getting above a threshold.

Global oil prices in recent days have risen to their highest in nearly three months after U.S. inflation data suggested interest rates in the world's biggest economy were close to their peak.

International brent crude futures were trading above $80 per barrel. Data on Wednesday showed U.S. consumer prices rose modestly in June and registered their smallest annual increase in more than two years as inflation continued to subside.

The data caused the U.S. dollar index to drop to the lowest since April 2022, which helped to boost oil prices. A weaker dollar makes crude cheaper for holders of other currencies.

What is it?:

It is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits.

When is it imposed?:

When the government notices a sudden increase in an industry's revenue, they impose this tax.

However, these revenues cannot be linked to anything the company actively pursued, such as its business strategy or expansion.

Consequently, a Windfall Tax is imposed on an industry's profits when it experiences a sharp increase in revenue due to unrelated external events.