Late on Friday, the finance ministry hiked the Special Additional Excise Duty (SAED), a windfall tax on domestically produced crude oil, to Rs 10,000 per tonne from Rs 6,700.Will come into effect on September 16
The decision comes amid rising crude oil prices. The rise is likely to impact oil exploration companies such as Oil and Gas Corporation of India and Indian Oil Corporation.
However, the SAED or diesel export duty will increase from the current Rs 6 per liter to Rs 5.50 per liter. According to a notification from the finance ministry, the customs duty on jet fuel or ATF has been reduced from the current Rs 4 per liter to Rs 3.50 per liter with effect from Saturday. Exports of gasoline will continue to be in the zero category. As product prices fell, the income tax on windfall profits was reduced. Unexpected tax cuts on exports of diesel and automatic transmission oil will hit Reliance Industries Ltd and Rosneft-backed Nayala Energy Corp as major fuel exporters.
read: India hikes windfall tax on diesel, jet fuel
It said gasoline SAED will continue to remain at zero. India will impose a windfall profit tax for the first time on July 1, 2022.
India introduced a windfall profits tax for the first time last July, joining several countries that have levied taxes on excess profits from energy companies. At that time, export taxes were levied at Rs 6 per liter ($12/barrel) on gasoline and ATF and Rs 13 ($26/barrel) per liter on diesel. A windfall profit tax of 23,250 rupees per ton ($40 per barrel) has also been levied on domestic crude oil production.
The tax rate is adjusted every two weeks based on the average oil price of the previous two weeks. Domestic crude oil producers, such as ONGC, sell crude oil at international parity prices. As international crude oil prices rose sharply, these producers reaped extraordinary profits. Diesel, gasoline and ATF prices have risen even more, resulting in unusually large export margins (the difference between product prices and crude oil prices) for these products. It is against this backdrop that additional taxes/duties are levied. As stated above, we are reviewing these regularly and taking into account all relevant factors, including international prices.
The government taxes oil producers on windfall profits at prices above $75 a barrel. According to the Ministry of Finance, special additional excise tax (SAED) data on crude oil production is not kept separately.