Synopsis: India has increased the windfall tax on diesel and ATF exports while cutting the levy on petrol exports as part of its latest fortnightly review. The revised duties, effective from July 16, are part of the government’s latest fortnightly review under the SAED mechanism.
The Centre on 15th July revised the windfall tax on fuel exports, raising duties on diesel and aviation turbine fuel (ATF) while reducing the levy on petrol. The revised rates will take effect from July 16 under the latest review of the Special Additional Excise Duty (SAED).
Windfall Tax Rates Revised
Key Impacts:
- Diesel export duty has been increased to ₹15.5 per litre from ₹8.5 per litre.
- ATF export duty has been raised to ₹14.5 per litre from ₹7.5 per litre.
- Petrol export duty has been reduced to ₹2.5 per litre from ₹4 per litre.
Why Has the Government Increased the Tax?
This revision follows increased volatility in the global crude oil market. Brent crude rose nearly 2% to a one-month high of $84.73 per barrel after the United States resumed a naval blockade of Iran, stoking fears of a disruption to oil supplies through the Strait of Hormuz a critical shipping route that handled roughly one-fifth of global oil flows before the conflict. India reviews the windfall tax approximately every fortnight, with the duty linked to international crude oil prices and refining margins, and revised periodically based on prevailing market conditions.
A Sharp Reversal in Just Two Weeks
The latest revision reflects the government’s fortnightly review of windfall taxes based on global crude oil prices and refining margins.
How the Windfall Tax Works
SAED (Special Additional Excise Duty), which is also referred to as windfall tax, was introduced in July 2022 due to the increase in international crude oil prices following the Russia-Ukraine war. Unlike the regular tax that is calculated using a company’s profit, SAED is calculated using international crude oil prices and refining margins. This rate is reviewed every two weeks by the government and revised depending on the prevailing circumstances in the market.
Exemptions Continue for Certain Exports
The revised duties apply to eligible exports of petroleum products. However, exemptions continue for specified supplies made by public sector oil marketing companies to neighbouring countries such as Nepal, Bhutan, Bangladesh, Sri Lanka, Mauritius and the Maldives, in line with the existing policy framework.
Will Consumers Be Affected?
The latest notification affects export duties only. The excise duty on petrol and diesel used for domestic consumption remains unchanged, and hence, there is no expectation that the revision would have any effect on the price of fuel at the pump. The price at the pump will still be determined by other elements such as the price of crude oil and foreign exchange rate.
