Finance Ministry likely to end windfall tax as oil prices stabilise

The Ministry of Finance (FinMin) is reconsidering the windfall tax on the export of petrol, diesel, and aviation turbine fuel (ATF) as global crude oil prices have stabilised, a senior government official said speaking on the condition of anonymity.

 

According to sources, the FinMin is reviewing the relevance and effectiveness of the windfall tax, which is levied as special additional excise duty (SAED) and updated fortnightly based on average oil prices over the preceding two weeks. The Ministry of Petroleum and Natural Gas has already recommended a review in a letter to FinMin.

 

In September, the government eliminated the windfall tax on domestically produced crude oil, reducing it to zero per tonne. Similarly, the tax on the export of petrol, diesel, and ATF was removed on September 18.

 

The windfall tax was initially introduced in July 2022 in response to significant profits made by oil refiners exporting fuel at the expense of domestic supply. It imposed an additional excise duty on both domestic crude oil production and the export of petrol, diesel, and jet fuel. The tax has been regularly revised based on market conditions.

 

However, with oil prices now stabilising, the tax is under scrutiny for its diminishing relevance. The government is expected to make an official decision soon, with sources indicating that the petroleum ministry has proposed its repeal due to the ongoing decline in oil prices.

 

In addition, the Ministry of Petroleum has urged the FinMin to consider bringing natural gas under the Goods and Services Tax (GST). The proposal will be reviewed by the GST Council led by the Union Finance Minister.