New Delhi: The government has slashed the windfall profit tax levied on domestically produced crude oil as well as on export of diesel and ATF following a drop in global oil prices, stated an official order dated December 15. The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been cut steeply to Rs 1,700 per tonne from Rs 4,900, it added.
The government has also cut the tax on the export of diesel to Rs 5 per litre from Rs 8 and the same on overseas shipments of ATF to Rs 1.5 a litre from Rs 5. The new tax rates are effective from December 16. The reduction in tax rate follows a 14 percent slump in global crude oil prices since November.
The basket of crude oil that India imports averaged USD 77.79 per barrel in December as against USD 87.55 last month. It averaged USD 91.70 per barrel in October. Similarly, the price of diesel has also come down to USD 104.86 per barrel this month from USD 123.18 in November and USD 133.52 in October. The government levies tax on windfall profits made by oil producers on any price they get above a threshold of USD 75-76 per barrel.
The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.
India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.
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