The Centre on July 1 slapped a windfall tax on domestic crude oil producers, imposed export duties on petrol, diesel and aviation turbine fuel (ATF), and hiked the import duty on gold in efforts to reduce pressure on the rupee, rein in the current account deficit (CAD), and increase the domestic supply of petroleum products.
- Domestic producers sell crude oil to domestic refineries at international parity prices, thus making windfall gains.
- After imposing an export tax on petrol, diesel and jet fuel, India also joined nations like the UK in imposing a windfall tax on crude oil produced locally.
- The government slapped a ₹23,230 per tonne additional tax on domestically produced crude oil to take away windfall gains accruing to producers from high international oil prices, as domestic crude producers sell crude to domestic refineries at international parity prices.
- As a result, the domestic crude producers are making windfall gains.
- A windfall tax is a one-off tax on companies that have seen their profits surge extraordinarily not because of any clever investment decision they have taken or an increase in efficiency or innovation, but simply because of favourable market conditions.
- Giving out reasons for the introduction of the new levies, Union Finance Minister had stated that refiners earned “phenomenal profits” from shipping overseas while reducing domestic supplies.
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