A big update has come regarding domestic crude oil. The government has made windfall profit tax on domestically produced crude oil zero. Also, duty on export of diesel has been halved to Rs 0.50 per liter and foreign shipment of ATF has been made nil. The new tax rates have come into effect from April 4. In such a situation, will there be any impact on the prices of petrol and diesel sold in the country?
According to Sabyasachi Majumdar, senior vice-president and group head of corporate ratings agency ICRA Ltd, crude oil prices were nearing the last revision in Special Additional Excise Duty (SAED) on March 21, 2023, so this time the excise duty has been reduced.
What is the new rates?
The levy on crude oil produced by companies such as Oil and Natural Gas Corporation (ONGC) has been reduced to Rs 3,500 per tonne (USD 5.8 per barrel). Significantly, the tax rates are reviewed on the basis of average oil prices in the last two weeks. Explain that the government taxes windfall profits made by oil producers on any price found above the $75 per barrel cap.
For the first time in 2022, an export duty of Rs 6 per liter (US$12 per barrel) was imposed on petrol and ATF and Rs 13 per liter (US$26 per barrel) on diesel.
Government’s tax collection may increase
SAED has been imposed on the production of crude oil and export of petroleum products in the year 2022. With this, the government’s collection in FY23 is estimated to be around Rs 40,000 crore. India first introduced a windfall profits tax on July 1 last year, which taxes extraordinary profits of energy companies.
Crude oil price may increase
OPEC Plus recently announced an additional production cut of 1.16 million barrels per day. This has seen a jump in the prices of crude oil. Whereas, SAED can be expected to move higher in the next rectification if crude oil prices rise.
Effect on the price of petrol and diesel
The windfall tax on crude oil exports is not going to affect the price of petrol and diesel sold in the country. This tax is applicable only on crude oil used for export.
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