Center cuts unexpected tax on crude oil sales, ATF exports

was on tax for the last two weeks 4,900 per tonne.

Further, a government notification dated December 15 stated that the tax on export of aviation turbine fuel has been reduced to to 1.5 per liter 5 per litre.

Windfall tax on diesel exports has been reduced since 5 8, while on petrol it remains ‘zero’. When the levy was first introduced, a windfall tax was levied on exports of petrol along with diesel and ATF. The special additional excise duty on ATF and diesel has been reduced, while the tax on petrol has been removed in the subsequent fortnightly review.

The windfall tax on crude is calculated by taking away any price producers are getting above a threshold, and the levy on fuel exports is based on the crack, or margin, that refiners earn on overseas shipments. These margins are mainly the difference between international oil price and cost.

The windfall tax cut on locally produced crude oil comes at a time when oil prices have come down substantially and are below the $80 per barrel mark.

At the time of writing, the February contract of Brent was trading at $79.56 a barrel on the Intercontinental Exchange, down 2.03% from its previous close. The January contract for West Texas Intermediate (WTI) fell 2% to $74.59 a barrel.

The volatility in the prices is expected to continue due to uncertainty in the global markets and easing of its zero covid policy by China.

Crude prices have come down substantially despite the imposition of a price cap on Russian seaborne crude oil from December 5.

The windfall tax was first imposed on July 1 as energy companies raked in huge profits amid multi-year highs in crude oil prices due to the Russia-Ukraine conflict. At that time, the export duty of Duty imposed on petrol and aviation turbine fuel at the rate of Rs 6-6 per liter 13 on diesel. There was a windfall tax on the sale of locally produced crude oil 23,250 per tonne when the tax was first imposed.

Unforeseen taxes are reviewed every fortnight. The levy was expected to compensate for the reduction in excise duty on petrol and diesel by the Center to provide relief to consumers.

On 8 November, Mint reported that nearly four months after imposing a windfall tax on refiners and local crude producers, the government has only 2,500-3,000 crore per month from the levy, far less than is fully needed to make up for the loss in revenue due to the cut in excise duty.