The Indian government announced on Monday the removal of the windfall tax on crude products, aviation turbine fuel (ATF), and the export of petrol and diesel. The change, which took immediate effect, is being hailed as a significant relief for oil producers and refiners in the country.
According to a report by CNBC TV18, sources revealed that top government departments, including the Prime Minister’s Office, conducted a detailed review of the levy imposed in July 2022. The discussions, involving the Revenue Department and the Petroleum Ministry, led to the decision to “discontinue with the tax.”
The windfall tax was introduced on July 1, 2022, targeting domestic crude oil production after a surge in global crude prices. It aimed to capture the excess revenue generated by producers from the unexpected gains.
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Sources told CNBC TV18 that several factors contributed to the decision to abolish the windfall tax, including the fact that the levy had not been generating significant revenue.
“The industry, since its existence, was unhappy with the tax. The levy was not making the industry enhance production levels, thus the PMO decided to discontinue the tax,” the sources said.
“Of late, average crude prices had become comfortable because of which most of the segments of the tax, be it the levy on ATF, petrol, or diesel, were continuing as a nil tax, thus the government did not want to continue with a tax which was not garnering much revenue,” they added.
Introduced in July 2022, the windfall tax was revised every 15 days, based on international crude oil prices. Since its implementation, the tax has been a subject of controversy. Initially, it was designed to balance government revenue amid fluctuating oil prices, but industries soon argued that it was negatively impacting profitability and even disincentivizing production.
In recent months, the tax became less effective as global crude oil prices declined, reducing the revenue it generated.
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