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The government has raised windfall tax on domestically-produced crude oil.
The hike is to ₹3,200 per tonne from ₹1,700 per tonne.
The tax is levied in the form of Special Additional Excise Duty (SAED).
According to an official notification, SAED on export of diesel, petrol, and jet fuel or ATF, has been retained at nil.
The new rates are effective from February 3.
India first imposed windfall tax on July 1, 2022, joining nations taxing supernormal profits of energy firms.
What is Windfall Tax?
A windfall tax is a special tax levied by governments on specific industries or companies.
When they experience unexpected and significantly above-average profits.
These profits are often attributed to external factors outside the company's control, like sudden price hikes in commodities or unforeseen market conditions.
Raise additional revenue: Especially during economic downturns when regular tax income might be lower.
Reduce income inequality: Redistribute unexpected profits deemed excessive to benefit broader society.
Discourage excessive pricing: Disincentivize companies from raising prices beyond reasonable levels.
Address specific social needs: Allocate funds to social programs or environmental initiatives.
Criticisms of windfall taxes:
Discourages investment: Companies might choose to invest less in expansion or innovation if future profits are taxed heavily.
Impacts market stability: Can create uncertainty and volatility in specific industries.
Politically motivated: Sometimes seen as opportunistic revenue generation rather than addressing specific issues.
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