Windfall Tax

Current Context : The Indian government has announced a reduction in the windfall tax on domestically-produced crude oil from Rs 2,100 to Rs 1,850 per tonne.

ABOUT WINDFALL TAX

• A Windfall Tax is a type of tax that is levied on companies or individuals who have unexpectedly and/or dramatically gained large profits, often due to external factors beyond their control.
  • It is commonly levied on industries such as oil, gas, and mining.
  • The purpose is to capture a portion of the extraordinary profits that companies make and redistribute it for public good.
  • It is a strategic measure to promote transparency and fairness and responsible economic practices in the energy industry.
• The windfall tax on crude oil producers was introduced in July 2022. Further it was extended to cover exports of gasoline, diesel, and aviation fuel as private refiners sought to capitalize on favorable refining margins abroad rather than selling locally.
• The tax rates are reassessed every 2 weeks.