Informist, Thursday, May 16, 2024
NEW DELHI – The government has cut the windfall gains tax on domestically produced crude oil by 2,700 rupees a tn to 5,700 rupees a tn, the finance ministry said in a notification late on Wednesday. The cess on diesel exports, aviation turbine fuel exports, and petrol remained unchanged at nil.
This is the 42nd revision in windfall gains tax since it was first imposed in July 2022. These taxes, which are in the form of cess, are for taxing supernormal gains of oil producers and fuel exporters. The government reviews these taxes on a fortnightly basis of oil prices and fuel margins in the international market.
These tax changes reflect the movement of international crude oil and fuel margins over the past couple of weeks. Brent crude oil futures have traded in a range of $81-$86 per barrel in the last two weeks, lower than the range of $86-$91 per bbl in the prior fortnight.
The revised cess translates to around $9.2 per bbl. When the government had first levied the cess on domestic crude, it was 23,250 rupees per tn, and translated to around $40 a bbl. The cut in windfall gains taxes comes as a positive for upstream oil companies such as Oil and Natural Gas Corp Ltd, Oil India Ltd, and Vedanta Ltd.
These levies were first imposed on Jul 1, 2022 to tax the windfall profits of crude oil producers and fuel exporters due to high oil and fuel prices globally. While taxes on petrol exports were also imposed initially, they were reduced to nil from Jul 20, 2022 and have not been hiked since. The cess on exports of aviation turbine fuel has been kept at nil since the start of the year.
The government had imposed the levies on fuel exports after fuel pumps in some parts of the country faced supply shortages that were partly due to private sector refiners reducing domestic sales of petrol and diesel in favour of significantly more lucrative exports. Private fuel retailers Reliance Industries Ltd and Nayara Energy reportedly reduced domestic retail sales due to heavy under-recoveries.
As for domestic crude oil, upstream oil companies were raking in massive profits due to the surge in global oil prices in the aftermath of Russia's invasion of Ukraine. Indian oil producers price crude oil in line with global prices. End
US$1 = 83.50 rupees
Reported by Shubham Rana
Edited by Manisha Baxla
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