The Centre has announced a reduction in windfall profit tax on crude petroleum and special excise duty on diesel, aviation turbine fuel (ATF), and crude petroleum. The new tax rates will take effect from February 16.
What is Windfall Tax?
A windfall tax is a higher tax rate levied by governments on certain industries when economic conditions allow those industries to earn above-average profits. So, when any industry, in this case, oil and gas, benefits from an event or a one-time external situation (the Russia-Ukraine war) for which they were not responsible and makes sudden profits, these profits are taxed separately, in addition to the normal taxes that these companies pay to governments.
The windfall profit tax was first imposed in India on July 1, 2022, and it targets the super normal profits of energy companies. It is levied by governments when an industry earns unexpectedly large profits primarily due to an unprecedented event.
The windfall tax on crude petroleum has been reduced from Rs 5,050 per tonne to Rs 4,350 per tonne. Additionally, the special additional excise duty on ATF has been slashed from Rs 6 per litre to Rs 1 per litre. The special extra excise duty on diesel has also been reduced from Rs 7.5 per litre to Rs 3 per litre. However, petrol continues to be exempt from any special additional excise duty.
CBIC Chairman Vivek Johri said that as of then, crude prices were again on the rise and, therefore, for the time being, the windfall tax would continue.
Furthermore, Revenue Secretary Sanjay Malhotra mentioned that the budget had estimated a collection of Rs 25,000 crore from the windfall tax in the current fiscal.
The decision to reduce the taxes comes after the government last year, in May 2022, announced a reduction in the excise duty on petrol and diesel. Petrol and diesel excise duties have been reduced by Rs 8 per litre and Rs 6 per litre, respectively.
Sources: moneycontrol.com
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