Softer global oil price cuts windfall tax collections

livemint.com:

₹1.5 trillion in the April-October period. This tax is levied as special additional excise duty and revised nearly twice a month. During April-October, the highest rate of windfall tax on crude oil was ₹12,100 a tonne, levied in the fortnight starting 30 September.

This is a steep drop from ₹23,250 levied during 1-20 July, 2022, before it was lowered to ₹17,000 a tonne. On Monday, the government kept windfall tax at a nominal ₹1,300 a tonne, showed a Central Board of Indirect Taxes and Customs (CBIC) order. The decline in windfall tax collections follows a sharp decline in global prices of crude oil and fuels.

In the first seven months of the current fiscal, average price of the Indian crude oil basket stood at $83.4 a barrel, 18% below close to $102 a barrel a year earlier. In the case of petrol and diesel, international prices have fallen annually by 19% and 28% respectively to $94.74 and $102.49 a barrel in the same period. While excise duty is a tax on production, the windfall tax, seeks to mop up a part of the super profit margins that Indian crude oil producers and exporters of petrol, diesel and jet fuel make when their price realization, which is linked to global prices of these commodities rather than their cost of production, goes up.

Export of fuel from special economic zones are not covered under this levy. Crude oil producers charge global prices when they sell to domestic refiners. Refiners also realize global prices of auto fuels in domestic market and abroad.