The GOI has pulled down the windfall tax on domestic crude oil, marking a second slash in June’24

The Indian government has announced a reduction in the windfall tax on domestically-produced crude oil, bringing it down to Rs 3,250 per tonne from Rs 5,200. This adjustment, effective from June 15, 2024, comes in response to the declining prices of crude oil in the international market. The review and adjustment of the tax rate are part of a fortnight assessment based on the average oil prices of the preceding two weeks.

Windfall taxes are extraordinary levies imposed by governments on companies or sectors that experience unexpectedly large profits due to external economic factors beyond their control, such as significant fluctuations in commodity prices. Initially introduced in India on July 1, 2022, the windfall profit tax is aimed at redistributing the extraordinary profits from oil companies to fund public welfare programs, mitigate budget deficits, or address other economic needs. This tax mechanism reflects India's alignment with global practices where nations tax the enormous profits of energy firms, especially during periods of sharp price increases in energy markets.

As per the official notification, despite the reduction in the tax on crude oil, the Special Additional Excise Duty (SAED) on the export of diesel, petrol, and jet fuel remains unchanged at nil. This policy aims to stabilize domestic supplies by discouraging exports, particularly when international crude prices are low.

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The implementation of this revised windfall tax rate follows a previous adjustment on June 1, where the rate was reduced from Rs 5,700 to Rs 5,200. The continuous monitoring and adjustment of the windfall tax shows the government’s commitment to maintaining economic stability.