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Government of India raises windfall tax on crude petroleum oil and diesel

Utkarsh Classes 01-08-2023
Government of India raises windfall tax on crude petroleum oil and diesel Economy 4 min read

The Union Ministry of Finance in a notification issued on 31 July 2023  has increased the Special Additional Excise Duty (SAED) also popularly called as windfall taxes , on  the domestically produced crude petroleum oil  from Rs 1,600 to Rs 4,250 per tonnes . It also imposed a  Special Additional Excise Duty of Re 1 per litre on diesel. The increase in SEAD  is applicable from 1st August 2023.  

There has been no change in the zero  percent Special Additional Excise Duty  levied on petrol and aviation fuel .

Reason for imposing windfall tax 

  • The government of India imposed the windfall tax on the  domestically produced crude and on the export of petrol ,diesel and aviation turbine fuel on 1 st  July 2022 so as to discourage its export from India . 
  • Due to the Russia -Ukraine war the prices of crude petroleum oil and  refined petroleum products were very high in the international market in 2022. 
  • To take advantage of this and earn bumper profit the private oil refining companies started exporting domestically produced  crude petroleum oil and refined petroleum products  from India leading to their shortage in India.
  • This led to a sharp rise in the prices of the crude petroleum oil and refined petroleum products in India . 
  • To discourage the private oil refiners from exporting such crude petroleum oil and products and to decrease its prices in domestic market products, the government of India imposed the special tax called  Special Additional Excise Duty or windfall tax.

Windfall Tax 

  •  It is a special tax which is imposed on companies which earn abnormal profits due to sudden increase in the price of the goods they sell . 

  • In India domestic crude oil price  is linked with the international prices .  With the increase in the international price the domestic price increases automatically resulting in abnormal profit for  crude oil producing companies like ONGC ,Oil India limited and Vedanta limited.

Excise Duty 

  • It is a type of indirect tax which is imposed during the production of  goods.  The excise duty on petroleum does not come under the Goods and Service Tax (GST).
  • All the revenue raised by the central government through the Special Additional Excise Duty or windfall tax is retained by the government of India and it is not shared with the state government .
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