Govt cuts windfall tax on petroleum crude by 9%, new rates in effect from June 1. Details here

The windfall tax on petroleum crude has been slashed by 9% with effect from June 1, as per a notification issued by the government. This marks the third consecutive downward revision in the taxation rate.

With the latest cut, windfall tax on petroleum crude has come down to ₹5,200 per metric tonne, as compared to ₹5,700 charged till May 31.

The windfall tax rate on diesel and aviation turbine fuel (ATF) remains unchanged at zero, as per the notification issued by the finance ministry on May 31.

Notably, the government began to impose the windfall tax from July 2022 onwards, after refiners drew superprofits due to the export of crude at elevated global prices. The move is aimed at ensuring sufficient supply in the domestic market.

Global oil market awaits OPEC+ decision

The reduction in the windfall tax rate comes ahead of the crucial meeting called by the Organisation of Petroleum Exporting Countries and its allies (OPEC+). The group, which will meet in Riyadh on June 2, will take the call on whether they should extend the deep production cuts till 2025.

At present, OPEC+ members have voluntarily reduced the output by 5.86 million barrels per day. Out of this, 3.66 million bpd of output cut will remain valid till 2024-end, whereas the validity of additional 2.2 million bpd cut will expire in June.

A decision to prolong the output cuts may push the global crude prices upwards, say analysts. On the other hand, a relaxation in the production curbs may ease the prices. The benchmark Brent crude has been hovering around $82-$83 per barrel mark, despite the prevailing tensions in the Middle East.