Centre increases windfall tax on crude oil to Rs 1,600 per tonne from zero, effective from July 15

The Centre has reimposed a windfall tax on domestic petroleum crude, effective from Saturday (July 15).

According to a notification, the government has levied the Special Additional Excise Duty (SAED) on crude petroleum, which has been raised to Rs 1600/per metric tonne from zero. 

The Ministry of Finance said that the government has left the windfall tax on diesel, petrol and aviation turbine fuel unchanged at zero. The tax rates are reviewed every fortnight based on the average oil prices in the previous two weeks.

A windfall tax is levied on a specific commodity, such as crude oil, when the price of that commodity increases dramatically. 

In May 2023, the Centre had slashed the windfall tax on petroleum crude to zero from Rs 4,100 per tonne. 
The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.

Last year, the government had imposed the windfall tax on crude oil producers and extended the levy on exports of gasoline, diesel and ATF. It was not just India, many countries had imposed windfall tax on 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.

Global oil prices in recent days have risen to their highest in nearly three months after U.S. inflation data suggested interest rates in the world's biggest economy were close to their peak.

International brent crude futures were trading above $80 per barrel.

"Crude oil extended its gains due to easing US inflation in June and a record fall in the dollar index. The dollar index slipped to 15 month lows after US inflation eased to 3.0% in June month. The dollar index slipped below 100 mark and the U.S. 10-year bond yields also slipped below 3.80%. OPEC’s upbeat oil demand forecast for 2024 also supported crude oil prices. OPEC's demand growth forecast for 2024 has now doubled to what the International Energy Agency said earlier. We expect crude oil prices to remain volatile in today’s session. Crude oil has support at $76.10–75.50 and resistance is at $77.80–78.40 in today’s session. In INR Crude oil has support at Rs 6,170-6,100, while resistance is at Rs6,330–6,410," Rahul Kalantri, VP Commodities, Mehta Equities, observed on Friday.

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