Govt Removes Windfall Tax on Petrol, Diesel Exports: In a major move, the Indian government has decided to abolish the windfall tax on aviation turbine fuel (ATF), crude products, petrol, and diesel exports. This decision comes after months of deliberations and is expected to bring relief to major oil companies such as Reliance and ONGC, boosting their refining margins.

The windfall tax was introduced in July 2022 in response to soaring global crude oil prices, with the aim of capturing a share of the extraordinary profits made by producers during that period. However, with the removal of this levy, oil giants are likely to benefit as their profit margins improve.

Reliance Industries, for instance, saw its shares trading positively at Rs 1,300.05 per share on Monday afternoon. This development follows an earlier move by the government in September, when it scrapped the windfall tax on crude oil exports, which had been set at Rs 1,850 per tonne in August.

The windfall tax had been imposed during the global surge in crude oil prices, particularly following the Russia-Ukraine war and Western sanctions on Russia. This surge led to massive, one-time profits for oil companies, prompting India to implement the tax in line with several other nations. The government aimed to generate additional revenue by taxing these unprecedented profits from oil producers and exporters.

The removal of the tax now signals a positive shift for the oil sector, providing companies with much-needed relief.

In September, the Indian government made a significant decision to reduce the windfall tax on domestically produced crude oil to zero per tonne. This tax, known as the Special Additional Excise Duty (SAED), is imposed on oil companies based on the average global oil prices over a two-week period. The rate of this tax is reviewed and adjusted every fortnight. Prior to the September revision, the windfall tax on crude oil was set at Rs 1,850 per tonne, effective August 31. The periodic adjustments in the windfall tax are aimed at reflecting fluctuations in global oil prices and ensuring that the tax burden remains aligned with market conditions. By slashing the tax to "nil," the government has provided significant relief to domestic oil producers, enabling them to benefit from better profit margins amid volatile global oil prices.

What is Windfall Tax:

A windfall tax is a levy imposed by governments on companies or individuals who experience unexpected and significant profits, typically due to extraordinary circumstances such as a surge in market prices or a sudden increase in demand. The tax is designed to capture a portion of these unanticipated profits, which are often seen as excessive or above normal levels. Windfall taxes are typically applied to industries like oil, mining, or energy, where companies may benefit from global price hikes or geopolitical events. The revenue generated from such taxes is often used to fund government programs or address economic imbalances.

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