The deal on peace talks between America and Iran has been finalized (US-Iran Peace Deal Done) and after Donald Trump’s statement of lifting the blockade around Hormuz and reopening of the Strait of Hormuz, the oil and gas crisis in the world seems to be reducing.
On the other hand, the government has increased the tax on diesel and air turbine fuel i.e. ATF. Taking a major decision on Monday, the government increased the windfall gain tax on the export of diesel and ATF, while there has been no change in the windfall tax on petrol for the fortnight (next 15 days) starting from June 16.
How much tax is there on diesel now?
If we look at a notification issued by the Finance Ministry in this regard, it says that this increase in tax will be effective from Tuesday, June 16. The rate of Special Additional Excise Duty (SAED) on Diesel Export increased from Rs 13.5 per liter to Rs 14 per liter. Whereas SAED on export of ATF has been increased from Rs 9.5 per liter to Rs 12.5 per liter.
Talk of relief at domestic level
This duty on petrol export is fixed at Rs 1.5 per liter. Meanwhile, there has been no change in the duty on petrol and diesel released for domestic consumption. That is, it is clear that there is relief for Indian consumers and the general public that this decision of the government will not have any impact on the domestic market. The objective of the windfall tax is to ensure availability of fuel in the domestic market and to prevent exporters from taking excessive advantage of international prices. This will help in giving priority to domestic supplies.
Why is ‘windfall tax’ imposed?
Crude oil prices keep increasing and decreasing in the international market. If the prices of fuel in the global market are higher than the prices of fuel in the domestic market, then the refineries start increasing exports so that they can earn more profits. To curb this and ensure availability in the domestic market, the government imposes windfall profit tax.
At the same time, when their prices go down in the global market, the companies themselves start reducing exports. When such a situation arises, the government takes a decision to reduce or remove the windfall tax. The government had first decided to impose windfall profit tax on 01 July 2022. When oil prices were on fire due to the war between Russia and Ukraine.
For the third time since the Middle East war
According to PTI report, amid increasing tension in the Middle East due to the US-Iran war, the government had increased the export duty on diesel and ATF on March 26 this year, while on May 16, the government had also imposed export duty on petrol. In fact, global crude oil prices had increased since the war started and the purpose of this step by the government is to prevent exporters from taking unfair advantage of the price difference.
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