New Delhi: Centre has announced a reduction in windfall profit tax on diesel exports to its lowest level of Rs 0.50 per litre, while completely removing it on Aviation Turbine Fuel (ATF).

This decision, which will come into effect from April 4, 2023, is expected to have a significant impact on the petroleum industry.

The Special Additional Excise Duty (SAED) on crude petroleum has been marginally increased from RS 4350 per tonne to Rs 4400 per tonne, resulting in higher prices for crude oil.

However, the SAED on diesel has been reduced from Rs 2.50 per litre to Rs 0.5 per litre, which will reduce the cost of diesel. The SAED on petrol will remain at zero, keeping the petrol prices unchanged.

For the aviation industry, the SAED on ATF has been removed completely from Rs 1.5 per litre. This move is expected to reduce operational costs for airlines and help them recover from the losses suffered due to Covid-19.

The tax rates are reviewed every two weeks based on the average oil prices of the previous two weeks. This is the second time the rates have been reduced in a fortnight, with the first reduction taking place on February 16.

India first introduced windfall profit taxes on July 1, 2022, in line with other countries that tax the super normal profits of energy companies.

The tax on windfall profits is levied on any price above $75 per barrel earned by oil producers. The levy on fuel exports is based on the margins earned by refiners on overseas shipments, which is the difference between the international oil price realised and the cost. Reliance Industries Ltd and Rosneft-backed Nayara Energy are the primary fuel exporters in India.

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