Windfall Tax

Windfall Tax

News: Government slapped a windfall tax on domestic crude oil producers, imposed export duties on petrol, diesel and aviation turbine fuel (ATF), and hiked the import duty on gold in efforts to reduce pressure on the rupee, rein in the current account deficit (CAD), and increase the domestic supply of petroleum products.

What is a windfall tax?
• A windfall tax is a higher tax rate on sudden big profits levied on a particular company or industry.
• Domestic producers sell crude oil to domestic refineries at international parity prices, thus making windfall gains.
• For example, ONGC reported bumper profits in the March quarter (when international prices soared to a near 14-year high of $139 per barrel).
• The windfall tax on oil produced within India and fuel exported overseas will make up for more than three-fourths of the revenue that the government lost when it cut excise duty on petrol and diesel to cool soaring inflation.
• India on July 1 joined a select league of nations globally that have taxed windfall gains accruing to oil companies from soaring energy prices.