In response to the evolving dynamics of the global oil market, the Indian government has decided to slash the windfall tax on domestically-produced crude oil, effective January 16. The tax, levied as the Special Additional Excise Duty (SAED), has been reduced from Rs 2,300 per tonne to Rs 1,700 per tonne. The move aims to address the challenges posed by soaring crude oil prices and is part of the government’s fortnightly review mechanism based on average oil prices in the preceding two weeks.
SAED on Fuel Exports Maintained at Nil
An official notification highlights that the SAED on the export of diesel, petrol, and jet fuel (ATF) will remain at nil, signaling a strategic decision to encourage fuel exports amid global uncertainties. This adjustment in tax rates follows the introduction of a windfall tax in July 2022, initially imposed due to the surge in crude oil prices. The tax triggers when global benchmarks exceed $75 per barrel for domestic crude oil and $20 per barrel for diesel, ATF, and petrol exports.
Global Economic Factors Impacting Oil Prices
The reduction in windfall tax comes against the backdrop of concerns about weakened global economic conditions and an increase in crude inventories in the United States, contributing to a decline in crude prices. This strategic tax adjustment reflects the government’s commitment to balancing fiscal measures with the volatile nature of the international oil market.
Key Takeaways for Competitive Exams
- Tax Reduction: Indian government slashes windfall tax on domestically-produced crude oil from Rs 2,300 to Rs 1,700 per tonne.
- Tax Form: Special Additional Excise Duty (SAED) is the form in which the windfall tax is levied.
- Effective Date: New tax rates are effective from January 16, with fortnightly reviews based on average oil prices.
- Export Tax Nil: SAED on export of diesel, petrol, and jet fuel (ATF) remains at nil, encouraging fuel exports.
- Initial Tax Introduction: Windfall tax was introduced in July 2022 amid soaring global crude oil prices.
Trigger Conditions: Domestic crude oil taxed if global benchmark exceeds $75 per barrel; export taxes triggered if product cracks rise above $20 per barrel.
Important Questions Related to Exams
- What is the revised windfall tax rate on domestically-produced crude oil in India?
- In what form is the windfall tax levied on crude oil?
- When do the new tax rates on crude oil become effective?
- What is the current Special Additional Excise Duty (SAED) on the export of diesel, petrol, and jet fuel?
- Why was the windfall tax introduced in July 2022?
Kindly share your responses in the comment section!!