NEW DELHI: The Indian government is set to reassess the windfall tax imposed on the export of petrol, diesel, and aviation turbine fuel (ATF) amid stabilising global crude oil prices, according to sources.
This review, conducted by the Finance Ministry, follows a formal request by the Ministry of Petroleum and Natural Gas, which also proposed bringing natural gas under the Goods and Services Tax (GST) framework.
What is a Windfall Tax?
A windfall taxis levied on companies that benefit from unexpectedly high profits due to external factors, such as a surge in commodity prices.
In India’s case, it was introduced in July 2022 after some oil refiners made extraordinary profits by exporting fuel while limiting domestic supply. This tax, categorised as Special Additional Excise Duty (SAED), is reviewed bi-weekly based on prevailing global crude oil prices.
Introduction and adjustments
Initially imposed on domestically produced crude oil, petrol, diesel, and ATF exports, the windfall tax sought to redistribute the excess earnings of energy companies.
Recently, the windfall tax on crude oil was reduced to ‘nil’ per tonne, reflecting stabilisation in crude prices. As of September 18, the SAED on diesel, petrol, and ATF exports remains at ‘nil’.
Now, the Finance Ministry will evaluate the tax’s effectiveness in mobilising revenue and addressing market distortions.
GST on natural gas
Alongside the tax review, the Petroleum Ministry has urged the Finance Ministry to push for natural gas to be included in the GST ambit.
Globally, several countries, including the UK and Italy, have introduced similar levies on energy firms reaping large profits during the energy price surge in 2022, exacerbated by geopolitical tensions like the Russia-Ukraine war.
This would streamline taxation, replacing multiple levies with a unified GST rate. However, any such decision lies with the GST Council, chaired by the Union Finance Minister.
