Major reduction in windfall tax on domestic crude oil, export duty on diesel increased marginally - New rates, effective-from date

New Delhi: The Centre, on Monday slashed the windfall gains tax on domestic production of crude petroleum to Rs 3500 per tonne from Rs 4400 per tonne. In a notification issued late on March 20, the Finance Ministry also increased the export duty on diesel to Rs 1. "This notification shall come into force on the 21st day of March, 2023," the government said in the notification.

Earlier this month, the government had increased windfall tax on local crude to Rs 4400 per tonne from the then existing Rs 4350 per tonne. It had reduced the export duty on diesel to Rs 0.5 per litre and scrapped it completely for Aviation turbine Fuel (ATF).

What is Windfall Tax: Explained in a nutshell

Special Additional Excise Duty (SAED), commonly referred to as windfall tax, was imposed by India for the first time on July 1, 2022. Considered a response to a dynamic system, which results in unexpected gains for companies, the government has been revising windfall tax from time to time. Officials have reportedly hinted that windfall tax will be removed when oil prices slash by $40 per barrel.

The government has been justifying its move to impose windfall tax on oil gains. In September, while addressing an online event, Finance Minister Nirmala Sitharaman had said that the decision to implement the windfall tax was taken after consulting the industry. "When we suggested the idea we had told the industry that the tax rate will be reviewed every 15 days and we have been doing that," she had said.