domestic producer Now a cess of Rs 23,250 per tonne will have to be paid as windfall tax on crude oil. After the decision was announced on Friday, shares Oil refining and marketing companies saw a decline as the move is going to affect their earnings. This levy has been imposed because domestic companies are making huge profits amid rising crude oil prices in the international market. Here’s what is windfall tax and its impact on companies:
What is windfall tax?
A windfall tax is a one-time tax levied by the government on a company. It is imposed on an unexpected or unexpectedly large profit, especially one obtained wrongly. Now, international crude oil prices have risen sharply in recent months. Domestic crude oil producers sell crude oil to domestic refineries at international parity prices. As a result, domestic crude producers are making windfall gains.
Keeping this in mind, a cess of Rs 23,250 per tonne has been imposed on crude oil.
On Monday, September Brent crude futures were down 36 cents, or 0.3 per cent, at $111.27 a barrel by 0300 GMT, having risen 2.4 per cent on Friday.
How will this affect companies?
Since companies will now have to pay a cess of Rs 23,250 per tonne on domestic crude oil, which will affect their margins. Revenue Secretary Tarun Bajaj told Reuters on Friday that the windfall tax would fall only if crude falls below current levels of $40 a barrel.
Analysts at Morgan Stanley Research said in a report that a higher cess of $40 per barrel for ONGC and OIL on domestic crude oil production. India There was a downside surprise and there should be downside risks to the sector. He said this impacted the earnings of ONGC and OIL India by 36 per cent and 24 per cent for FY23.
He also said that export taxes, sanctions and unpredictable taxes on oil producers are a global trend and highlight the tightening energy market outlook.
However, the Finance Ministry said that this cess will not have any adverse effect on the prices of domestic petroleum products/fuels. In addition, small producers, whose annual crude oil production in the last financial year is less than 2 million barrels, will be exempted from this cess.
Also, to encourage additional production over the previous year, no cess would be levied on such quantity of crude oil, which is produced by the crude producer in excess of the previous year’s production. This measure will not affect crude oil prices or the prices of petroleum products and fuels.
How much is the government likely to earn?
The tax on crude oil producers like Oil and Natural Gas Corporation, Oil India Ltd and Vedanta will fetch the government Rs 69,000 crore annually, considering oil production of 29.7 million tonnes in the 2021-22 financial year (April 2021 to March 2022). Used to be. PTI reports quoting sources.
For the remaining nine months of the current financial year, the levy will get the government around Rs 52,000 crore if the tax remains in place till March 31, 2023. On top of this, a new tax was introduced on the export of petrol, diesel and . ATF will bring in additional revenue.
The government has also imposed a cess equivalent to Rs 6 per liter on petrol and Rs 13 per liter on diesel, apart from the unexpected tax on crude oil.
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