The government on December 16 slashed the windfall profit tax on domestically produced crude oil and also reduced the levy on diesel. The revised tax rates become effective from December 16, 2022.

The tax on crude oil produced by firms such as the state-owned Oil and Natural Gas Corporation (ONGC) has been reduced to Rs 1,700 per tonne from the existing Rs 4,900 per tonne, as per government notification.

In the fortnightly revision of the windfall profit tax, the government cut the rate on export of diesel to Rs 5 per litre from Rs 8 per litre. The levy includes Rs 1.5 per litre as road infrastructure cess.The windfall tax on aviation turbine fuel has been reduced from Rs 5 per litre from to Rs 1.5 per litre, as per the notification.

The government has been revising the windfall tax almost every two weeks since its introduction. After the latest revision, the tax on oil produced from domestic fields has been lowered by about 65%.Windfall profit tax is calculated by taking away any price that producers are getting above a threshold.

India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies. At that time, export duties of Rs 6 per litre (USD 12 per barrel) each were levied on petrol and ATF and Rs 13 a litre (USD 26 a barrel) on diesel. A Rs 23,250 per tonne (USD 40 per barrel) windfall profit tax on domestic crude production was also levied.