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The cuts in taxes were expected after the oil prices fell earlier this month.

The windfall taxes on domestic crude oil reduced, export levies on fuel slashed.

By Shankar Krishnan --
Friday, 22 Jul, 2022

To Begin with, a windfall tax is a tax levied on an unforeseen or unexpectedly large profit, especially one regarded to be excessive or unfairly obtained. Indian MSMEs engaged in Crude oil and other petroleum-based products use it to power vehicles and generate electricity. Plastics, polyurethane, solvents, and countless more intermediate and finished commodities are produced by the petrochemical industry, which is a part of the industrial sector.

The changes introduced by the Government in the tax rates are shown in the table below:

TAX (In Rupees per Litre)

	Earlier	Now
Petrol	6	0
Diesel	13	11
Aviation Fuel	6	4
Domestic Crude (Rupees per Tonne)	23,250	17,000

The tax on domestically produced crude oil was cut 27% to Rs.17000 per tonne from Rs. 23,250 per tonne. The tax on petrol exports was completely scrapped from Rs.6 while that on diesel and aviation fuel was reduced by Rs 2 per litre. The special additional excise duty levied on exports from special economic zones is also slashed.

The action to reduce this tax on crude oil and slashing of export levies on fuels like petrol,diesel and aviation fuel will directly affect the MSMEs by curbing their logistics expenses and boosting their profit margins. The factories running with boilers or the industries using petro-chemical products as fuel will be directly affected. The taxes also helped government mop up some oil firm’s super-profits .Fuel prices have already started impacting the raw material prices especially the petroleum based products which are manufactured by MSMEs.

"The levy was imposed after considering windfall gains by the domestic crude producers due to rising global crude prices in recent months" , said Finance minister Nirmala Sitharaman.

The taxes were a part of steps taken to improve the local supplies hampered because of higher fuel prices. The cut in duties will also lower the impact on the refining margins for Oil refining companies. The exemption to exports from SEZs, although it may affect the local availability of key fuels like crude oil, shows that the government is under pressure to support exports and sustain dollar inflows as India reported a record trade deficit in June. These steps would play a pivotal role in assisting the recovery process of the MSMEs hit because of the rising global crude prices in recent months.

The windfall taxes on domestic crude oil reduced, export levies on fuel slashed.. To Begin with, a windfall tax is a tax levied on an unforeseen or unexpectedly large profit, especially one regarded to be excessive or unfairly obtained. Indian MSMEs engaged in Crude oil and other petroleum-based products use it to power vehicles and generate electricity. Plastics, polyurethane, solvents, and countless more intermediate and finished commodities are produced by the petrochemical industry, which is a part of the industrial sector.

The changes introduced by the Government in the tax rates are shown in the table below:

TAX (In Rupees per Litre)

<table>
 <tbody>
 <tr>
 <td> </td>
 <td>
 Earlier
 </td>
 <td>
 Now
 </td>
 </tr>
 <tr>
 <td>
 Petrol
 </td>
 <td>
  6
 </td>
 <td>
   0
 </td>
 </tr>
 <tr>
 <td>
 Diesel
 </td>
 <td>
 13
 </td>
 <td>
  11
 </td>
 </tr>
 <tr>
 <td>
 Aviation Fuel
 </td>
 <td>
  6
 </td>
 <td>
   4
 </td>
 </tr>
 <tr>
 <td>
 Domestic Crude (Rupees per Tonne)
 </td>
 <td>
 23,250
 </td>
 <td>
 17,000
 </td>
 </tr>
 </tbody>
</table>

The tax on domestically produced crude oil was cut 27% to Rs.17000 per tonne from Rs. 23,250 per tonne. The tax on petrol exports was completely scrapped from Rs.6 while that on diesel and aviation fuel was reduced by Rs 2 per litre. The special additional excise duty levied on exports from special economic zones is also slashed.

The action to reduce this tax on crude oil and slashing of export levies on fuels like petrol,diesel and aviation fuel will directly affect the MSMEs by curbing their logistics expenses and boosting their profit margins. The factories running with boilers or the industries using petro-chemical products as fuel will be directly affected. The taxes also helped government mop up some oil firm’s super-profits .Fuel prices have already started impacting the raw material prices especially the petroleum based products which are manufactured by MSMEs.

<blockquote>
"The levy was imposed after considering windfall gains by the domestic crude producers due to rising global crude prices in recent months" , said Finance minister Nirmala Sitharaman.
</blockquote>

The taxes were a part of steps taken to improve the local supplies hampered because of higher fuel prices. The cut in duties will also lower the impact on the refining margins for Oil refining companies. The exemption to exports from SEZs, although it may affect the local availability of key fuels like crude oil, shows that the government is under pressure to support exports and sustain dollar inflows as India reported a record trade deficit in June. These steps would play a pivotal role in assisting the recovery process of the MSMEs hit because of the rising global crude prices in recent months.