The Indian government has made notable adjustments to its taxation framework in the petroleum sector. The windfall tax on petroleum crude oil has been raised, while taxes on diesel and aviation turbine fuel (ATF) have been reduced, according to a government notification.
The windfall tax on crude oil has been increased from the previous rate to 2,300 Indian rupees ($27.63) per ton, up from 1,300 rupees. Simultaneously, the government has eliminated the tax on diesel, reducing it by 0.5 rupee per litre. Additionally, the windfall tax on aviation fuel, previously set at one rupee per litre, has been cut to nil.
These adjustments are part of the government’s response to the dynamic global oil market, where prices are subject to fluctuations influenced by economic uncertainties and changes in demand and supply. The windfall tax on crude oil is triggered when global benchmark rates exceed $75 per barrel.
The tax rates are regularly reviewed every fortnight, with adjustments based on the average oil prices observed in the preceding two weeks. The windfall tax, specifically, is imposed on domestic crude oil when global benchmark rates rise above $75 per barrel. For diesel, ATF, and petrol exports, the levy is triggered if product margins surpass $20 per barrel.
The recent changes in India’s oil tax structure reflect the government’s efforts to strike a balance between supporting economic demand, managing global oil price fluctuations, and ensuring the stability of the energy sector. The adjustments also align with broader global trends, where concerns over a weaker global economy and geopolitical tensions have contributed to shifts in oil prices.
These measures aim to provide flexibility in responding to changing market dynamics and economic conditions. The decision to increase the windfall tax on crude while reducing taxes on diesel and ATF underscores the government’s commitment to navigating challenges in the oil sector and promoting a balanced fiscal approach.
It’s essential to note that these adjustments follow a pattern of ongoing assessments and responses to global and domestic factors that impact the oil industry. The government’s proactive stance in modifying tax policies reflects its commitment to adapting to the evolving landscape of the energy market.