Windfall Profit Tax On Domestic Crude, Diesel Cut; Scrapped For ATF

The government cut the windfall profit tax on locally produced crude oil and diesel on Saturday, in line with a fall in international rates, and scrapped the levy on the export of jet fuel with effect from Oct. 2.

At the sixth fortnightly review, the government reduced the tax on domestically-produced crude oil to Rs 8,000 per tonne from Rs 10,500 per tonne.

The levy on the export of diesel was reduced to Rs 5 per litre from Rs 10 per litre.

The tax at the rate of Rs 5 a litre on aviation turbine fuel exports was scrapped with effect from Oct. 2, according to a finance ministry notification issued late Saturday night.

The reduction in the tax rates follows the easing of crude oil prices in international markets.

While private refiners Reliance Industries Ltd. and Rosneft-based Nayara Energy are the principal exporters of fuels like diesel and ATF, the windfall levy on domestic crude targets producers like state-owned Oil and Natural Gas Corp. and Vedanta Ltd..

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. But international oil prices have cooled since then, eroding the profit margins of both oil producers and refiners.

Export duties of Rs 6 per litre ($12 per barrel) were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

A Rs 23,250 per tonne ($40 per barrel) windfall profit tax on domestic crude production was also levied.

The duties were partially adjusted in the previous five rounds on July 20, Aug. 2, Aug. 19, Sept. 1 and Sept. 16 and were removed for petrol.