WINDFALL TAX

WINDFALL TAX

The Indian government has cut the recently imposed cesses and levies on diesel and aviation turbine fuel (ATF) and removed the cess on exports of petrol due to softening in crude oil prices, amid fears of a global recession.

About windfall tax

A Windfall tax is imposed by a government against certain industries when they experience above-average profits due to economic conditions.

India imposed windfall taxes on 1 July, following the super normal profits of energy companies.

Reduction in taxes

Additional excise duties equal to 6 rupees per liter on exports of petrol have been removed.
Duties on the diesel exports have been cut to 11 rupees per liter from 13 rupees per liter earlier.
The cess by way of special additional excise duty (or windfall tax) on domestic crude being sold to domestic refineries at international parity prices has been cut to Rupee 17,000 per tonne from rupee 23,250 per tonne.
The export duty on Aviation Turbine Fuel has been lowered by rupee 2 to rupee 4 per liter.

Aim:

It mainly aimed at increasing local supplies and boosting its revenues.

Significance

The development comes in the wake of softening international oil prices which are expected to benefit the energy firms.
The move will offer relief for top fuel exporters like Reliance Industries and the state-run Oil & Natural Gas Corporation

Why did the Government Increase the Duties Earlier?

The government on 1st July 2022 imposed special additional excise duty on export of the petrol and diesel to address the problem of fuel shortage in the country.
Starting June 2022, fuel pumps across the country have been reporting huge fuel shortages, leading to their closure.
The situation of fuel shortage lead the government to increase the duties.
The move assured of enough fuel available in the country and asked oil marketing companies to ensure that their fuel pumps must remain open.

Source: The Indian Express

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