CBIC Notifies Hike in Windfall Tax Rate for Crude Petroleum to Rs. 3,300 per Tonne

The Central government has announced a hike in the windfall tax on petroleum crude, elevating it to ₹3,300 per tonne effective from February 16, 2024, marking an increase from the previous rate of ₹3, 200 per tonne. This adjustment follows a series of recent modifications made by the government. On February 3, 2024, the windfall tax on petroleum crude was increased to ₹3,200 per tonne. On January 16, the windfall tax on petroleum crude was reduced from ₹2,300 per tonne to ₹1,700 per tonne. Prior to that, on January 2, the government had increased the windfall tax on crude oil to ₹2,300 per tonne from ₹1,300 per tonne.

The windfall tax targets unexpected or excessive profits, typically applied to specific industries during periods of significant gains. It aims to capture additional profits generated by businesses due to unforeseen market conditions. The adjustment reflects the government’s effort to balance promoting exports while ensuring a fair share of revenue.

It emphasised the government’s adaptability to the evolving dynamics of the petroleum industry. The increase in windfall tax could escalate production costs for crude oil producers, potentially impacting their profit margins. Should oil companies transfer the tax burden to consumers, it may result in higher prices for petroleum products, contributing to inflationary pressures and affecting consumer spending habits. Conversely, the government stands to gain additional revenue from the heightened windfall tax, which can be allocated towards public projects, services, or reducing fiscal deficits.

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