The government announced a cut in the windfall tax on domestically-produced crude oil to Rs 1,700 per tonne from Rs 2,300 per tonne with effect from Tuesday.
The tax is levied in the form of Special Additional Excise Duty (SAED). According to an official notification, SAED on export of diesel, petrol and jet fuel or ATF has been retained at nil.
The new rates are effective from January 16.
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
India imposed a windfall tax on crude oil producers in July 2022 amid soaring crude oil prices and extended the levy on exports of gasoline, diesel and aviation fuel as private refiners wanted to sell fuel overseas to make gains from robust refining margins instead of selling locally. Windfall tax is levied by governments when an industry unexpectedly earns large profits .
A windfall tax is levied on domestic crude oil if rates of the global benchmark rise above $75 per barrel. Export of diesel, ATF and petrol attract the levy if product cracks (or margins) rise above $20 per barrel. Product cracks or margins are the difference between crude oil (raw material) and finished petroleum products.
Concerns over demand due to a weaker global economy and rising crude inventories in the US have led to lower crude prices.