The Indian government on Friday (September 29) hiked special additional excise duty (SAED) on crude petroleum to Rs 12,100 per tonne with effect from September 30, 2023.

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In the last fortnightly review on September 16, the windfall tax on domestically produced crude oil was set at Rs 10,000 per tonne.

Besides, SAED or duty on diesel will be reduced to Rs 5 per litre from Rs 5.50 per litre and the duty on jet fuel or ATF will be lowered to Rs 2.50 per litre from Rs 3.50 per litre currently.

It said SAED on petrol will continue at nil, according to a finance ministry notification.

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India first imposed windfall profit taxes on July 1 last year, joining a growing number of nations that tax super-normal profits of energy companies. At that time, export duties of Rs 6 per litre ($12 per barrel) each were levied on petrol and ATF and Rs 13 a litre ($26 a barrel) on diesel.

The government levies tax on windfall profits made by oil producers on any price they get above a threshold of $75 per barrel. The levy on fuel exports is based on cracks or margins that refiners earn on overseas shipments. These margins are primarily a difference between the international oil price realised and the cost.

The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks. The government’s collection from the SAED, imposed on the production of crude oil and the export of petroleum products from July 1, 2022, is estimated at around Rs 40,000 crore in FY2023.

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Notably, a windfall tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits. So, as crude prices cross $90 a barrel, the government has hiked windfall tax on oil companies to tax higher profits.

Crude oil pumped out of the ground and from below the seabed is refined and converted into fuels like petrol, diesel and aviation turbine fuel.

First Published:Sept 29, 2023 10:35 PM IST