Tax on aviation fuel ATF has been reduced to Rs 1.5 per litre. The Finance Ministry has notified that the revised tax rates will be effective from today.
It is suggested that the reduction in windfall tax is to compensate the companies for the reduction in excise duty on petrol and diesel.
What is Windfall Tax?
A windfall profits tax is a higher tax rate imposed on windfall profits for a particular company or industry. Windfall profit tax exists in various countries around the world like Mongolia, Australia, Turkey etc. When the price of crude oil rises, the government imposes additional taxes on oil companies. This is an additional tax imposed when companies receive unexpectedly large amounts of profit other than as a result of their operations. For example, when winning lotteries and online jackpots, the winner pays tax on the winnings.
Windfall profit tax was first introduced in India on July 1. After the Russia-Ukraine crisis, crude oil prices skyrocketed and oil companies made huge profits. Crude oil prices have reached their highest levels in the last 14 years. Export duty has been imposed at Rs 6 per liter ($12 per barrel) on petrol and ATF and Rs 13 per liter on diesel. A windfall profit tax of Rs 23,250 per tonne has been levied on domestic crude production. When the price of crude oil crosses 75 dollars per barrel, the government tries to increase the profit tax. The government has been analyzing the windfall tax every fortnight since its introduction.
