India raises windfall gain tax on diesel and jet fuel (2024)

FAQs

Did India raise windfall tax on crude diesel aviation fuel? ›

April 15 (Reuters) - The Indian government has raised its windfall tax on petroleum crude to 9,600 rupees ($114.99) a metric ton from 6,800 rupees with effect from April 16, the government said on Monday. The tax, which is revised every fortnight, will remain unchanged at zero for diesel and aviation turbine fuel.

Windfall Tax is a one-time tax that is imposed on entities that have made huge profits due to favorable market conditions. The Government of India impose this tax so that in return they can increase their own revenue.

Earlier, on April 4, the government had raised the windfall tax on petroleum crude from ₹4,900 to ₹6,800 per metric ton. The Indian government announced on April 15, Monday, that it has increased the windfall tax on petroleum crude from ₹6,800 to ₹9,600 per metric ton, effective April 16.

Oil, gas and mining industries are subject to windfall tax when they earn high profits due to sudden rises in the prices of their goods. Some governments may also levy windfall tax on telecommunication companies when exclusive licences or other favourable scenarios increase their profit margins.

Petrol tax in India consists of 55% of petrol's retailing price while diesel tax is 50% of the fuel's retail value. Apart from this, sales tax and Value Added Tax (VAT) are levied at varying rates by the State Governments. Here are the major charges present in India's fuel pricing structure: Base price of crude oil.

India's petroleum product exports to Europe nosedived to an 18-month low in January, 2024, with tankers hauling fuels — mainly diesel — avoiding the Suez Canal route in view of the security concerns in the Red Sea region, as per data from commodity market analytics firm Kpler.

One major risk is the potential negative impact on private sector investment. By imposing windfall taxes, the after-tax earnings of companies can be reduced, which may discourage investment and hinder economic growth.

The WEP affects retired- or disabled- worker beneficiaries and their eligible dependents. However, it does not affect survivor beneficiaries. The Social Security benefit formula is progressive, replacing a greater share of career-average earnings for low-paid workers than for high-paid workers.

The benefits of a windfall tax include proceeds being directly used by governments to bolster funding for social programs. Those against windfall taxes claim that they reduce companies' initiatives to seek out profits.

In May 2022, India reintroduced liquefied petroleum gas (LPG) subsidies for the beneficiaries of the PMUY scheme in an attempt to target subsidies to low-income consumers. While the data above includes only central-level oil and gas subsidies, significant subsidies also exist at the sub-regional levels.

Do oil companies pay their fair share of taxes? ›

Large oil companies in the United States have been paying taxes at a significantly lower rate than most other corporations. The chief reason is that there are provisions in the U.S. tax code that allow energy companies to defer and avoid federal income tax payments.

India introduced windfall profit taxes on July 1, 2022, to tax supernormal profits of energy companies. Windfall tax: The Government of India on Monday slashed the windfall tax on petroleum crude to Rs 1,700 a tonne from 2,300 rupees a tonne, according to a government notification.

India initially introduced the windfall tax in July 2022 in response to the escalating price of crude oil. This tax is imposed by governments when an industry unexpectedly generates substantial profits, typically attributed to an unprecedented event.

WEP doesn't really affect all that many retirees. In 2018, for instance, just 1.8 million retirees, spouses and children, most of whom live in just seven states – California, Colorado, Illinois, Louisiana, Massachusetts, Ohio and Texas, were subject to WEP.

A windfall profits tax is a one-time surtax levied on a company or industry when economic conditions result in large and unexpected profits. Inheritance taxes and taxes levied on lottery winnings can also be considered windfall taxes on individual profits.

Listen to This Article. India provided the fourth largest fuel subsidies among countries in absolute terms in 2022 preceded by China, the United States and Russia, according to a working paper by the International Monetary Fund. Globally, fossil fuel subsidies were $7 trillion in 2022 or 7.1 per cent of GDP, IMF said.

$0.003 per gallon Petroleum Environmental Assurance fee applies to aviation fuels. General aviation use may also be subject to a $0.01 per gallon local tax.

Import dependence of crude oil soared to 87.7 per cent in 2023-24, up from 87.4 per cent, according to PPAC. Domestic crude oil production was almost unchanged at 29.4 million tonnes in 2023-24. Besides crude oil, India spent USD 23.4 billion on import of 48.1 million tonnes of petroleum products like LPG.