Government Adjusts Taxation Policy, Lowers Levy On Diesel Exports

The government has implemented modifications to the tax structure for crude oil and diesel exports. In accordance with an official notification, the Special Additional Excise Duty (SAED) on domestically produced crude oil has been increased from Rs 9,050 per tonne to Rs 9,800 per tonne, as reported by PTI. Simultaneously, a reduction has been made in the levy on diesel exports.

The government has decided to alter the SAED rates for diesel and jet fuel (ATF) exports.

The SAED on diesel exports has been decreased to Rs 2 per liter from the previous Rs 4 per liter, while the SAED on ATF exports has been abolished, previously standing at Rs 1. Importantly, there will be no change in the SAED rate for petrol exports, which will continue to remain at zero. These revised tax rates will take effect starting Wednesday.

Last year, India initiated the imposition of windfall profit taxes, aligning itself with the global trend of taxing the excessive profits earned by energy corporations. During that time, both petrol and ATF were subject to export duties amounting to Rs 6 per liter (equivalent to USD 12 per barrel), whereas diesel incurred export charges of Rs 13 per liter (USD 26 per barrel).

A windfall profit tax of Rs 23,250 per tonne (USD 40 per barrel) was imposed on crude oil production by companies such as Oil and Natural Gas Corporation (ONGC). The taxation rates are subject to biweekly review, contingent upon the average oil prices recorded in the preceding two weeks.

A windfall tax is imposed on domestic crude oil when global benchmark rates exceed USD 75 per barrel, while the export of diesel, ATF, and petrol incurs the levy if product cracks or margins rise above USD 20 per barrel.

In October, the international crude oil price averaged USD 90.17 per barrel. Tax on domestic crude oil fluctuated, being temporarily waived in April and later reinstated, as was the case with diesel and ATF taxes. However, the export tax on petrol was eliminated during the first review.

Crude oil from land and beneath the seabed is refined into fuels like petrol, diesel, and ATF. Reliance Industries Ltd, with the world's largest oil refinery complex in Jamnagar, Gujarat, and Rosneft-backed Nayara Energy, are the main fuel exporters in India.