Windfall tax in India grabbed headlines when it targeted unexpected profits in the oil sector. Introduced to capture extraordinary gains from external events, it stirred debate. Though scrapped in 2024, its story offers lessons for investors and businesses. What was it, and why does it matter? Let’s break it down.
What Is Windfall Tax?
Windfall tax in India was a levy on industries reaping sudden, unearned profits due to global events. Launched in July 2022, it hit crude oil producers and fuel exporters like ONGC and Reliance. Triggered by soaring oil prices from the Russia-Ukraine war, it taxed gains above $75 per barrel at rates up to ₹23,250 per tonne. The goal? Redistribute profits and fund public welfare. It raised ₹44,000 crore by 2024, per CNBC-TV18.
Why Was It Introduced?
This tax in India aimed to address economic imbalances. In 2022, oil firms like GAIL and Oil India posted record profits as Brent crude hit $139 per barrel, per The Indian Express. Meanwhile, high fuel prices hurt consumers. The tax ensured companies shared gains, easing India’s trade deficit. In addition, it curbed exports to prioritize domestic fuel supply. However, critics argued it hurt innovation.
How It Worked and Evolved:
Windfall tax in India, formally Special Additional Excise Duty (SAED), was reviewed every two weeks based on global oil prices. It started at ₹23,250 per tonne for crude and ₹6-13 per litre for diesel, petrol, and ATF exports. By August 2024, it fell to ₹1,850 per tonne, then zero in September, per The Hindu. The government scrapped it entirely on December 2, 2024, as Brent crude dropped to $73 per barrel, per Reuters. In 2023-24, it collected ₹13,000 crore, down from ₹25,000 crore, per CNBC-TV18.
What was the Impact?
Windfall tax in India stirred controversy. Oil firms claimed it cut profits and deterred production, while the government saw it as fair redistribution. Its removal boosted shares—Reliance rose 1.42% to ₹1,310, per Business Standard. Yet, it signals stable oil prices ahead. Learn more at the Income Tax Department website.
Conclusion:
In conclusion, windfall tax in India was a short-lived tool to balance wealth during crises. Understanding it helps navigate future tax policies. Ready to stay informed? Explore more tax insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Windfall Tax in India here – https://www.investopedia.com/windfall.asp