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- Recently, the government scrapped a windfall tax on the export of petrol and cut the levy on overseas shipments of diesel and ATF as well as on domestically produced crude oil following a decline in global oil prices.
About Windfall Tax
- Background:
- On July 1, the government imposed windfall gain taxes on the export of petrol, diesel and aviation turbine fuel (ATF), and on the domestic production of crude oil.
- It has also mandated exporters to meet the requirements of the domestic market first.
- Meaning:
- Windfall taxes are imposed by a government against certain industries when they experience above-average profits due to economic conditions.
- The tax was imposed after the companies were seen to be making abnormal profits with oil prices shooting up in global markets due to geopolitical turmoil.
- Windfall taxes are primarily directed on companies in a certain industry that sees the most windfalls economically.
- Aim:
- It aimed at increasing local supplies and boosting its revenues.
- Significance:
- The development comes in the wake of softening international oil prices which are expected to benefit energy firms.
- The move will offer relief for top fuel exporters like Reliance Industries and state-run Oil & Natural Gas Corp.
Source: BT
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