The Centre is likely to earn about Rs 30,000-35,000 crore from the windfall gains taxes on oil companies this fiscal due to the falling global crude oil prices and the reduction in the levies since they were imposed on July 1, 2022. While the finance ministry had not given an official estimate of the revenue to be raised from the taxes, it was expected initially that it would raise at least about Rs 60,000 crore this fiscal.
“Given the recent trends in crude oil prices and the series of revisions in the windfall gains taxes, it is estimated that the revenue from it would be in the range of Rs 30,000 crore,” said a person familiar with the development. Another round of revision in the taxes is expected by early next week, he added.
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The lower collection is, however, not expected to impact the government’s fiscal math as tax collections have been buoyant and higher than estimated till now. “This was an additional tax that was imposed mid-year and had as such not been factored in the calculations for the Budget Estimate of 2022-23. The collections from the tax, even if they are lower, will not have any major impact,” the source added, noting that tax collections are expected to surpass the Budget estimate for the fiscal.
In order to tax the supernormal profits being made by domestic producers of crude petroleum when international prices rose, the government had imposed these taxes. These comprised special additional excise duties of Rs 13 per litre on diesel exports and `6 per litre each on petrol and aviation turbine fuel exports.
It had also imposed a special additional excise duty of Rs 23,250 per tonne on domestic crude oil production. No windfall tax is applicable on exports from special economic zones.
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The taxes have been reviewed on a fortnightly basis since then and have seen reduction in recent weeks due to the cooling crude oil prices.
Soon after the tax was imposed, Moody’s Investor Services had in July said the windfall taxes on domestic crude oil production and fuel exports would generate about `948 billion ($12 billion) for the government in the remainder of the current fiscal. “Based on the production of crude oil and export of petroleum products in India in the fiscal year ended on March 31, 2022 (fiscal 2021), we estimate that the government will generate close to $12 billion of additional revenue for the remainder of fiscal 2022,” the agency had said.
According to PPAC data, the Indian basket of crude oil averaged at a high of $116.01 per barrel in June 2022 and has since then steadily declined to $77.79 per barrel in December.
Experts believe that with the fall in prices, the government may soon take a decision on the future of the windfall gains taxes. “We expect the windfall taxes on domestic crude oil production levied by the government in 2022 to be phased out in 2023 with moderating prices,” Fitch Ratings said recently.