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Windfall Tax

Why is it in the news?

  • Recently, the government of India has increased the special additional excise duty (SAED) on crude petroleum to ₹12,100 per tonne, effective from September 30, 2023. In the previous review on September 15, the windfall tax on domestically produced crude oil was set at ₹10,000 per tonne.
  • India initially introduced windfall profit taxes on July 1, 2022, and these changes reflect adjustments in tax rates related to the petroleum sector.

About Windfall Tax

  • Windfall taxes target profits generated by a company due to external, often unforeseen events, without the firm’s active efforts or strategies.
  • A windfall is characterized as an unearned and unanticipated gain in income, requiring no additional effort or expenses from the company.
  • Governments impose a one-time tax retrospectively, exceeding normal tax rates, on such windfall profits.
  • Windfall taxes are frequently discussed in the context of oil markets, where price fluctuations result in volatile and irregular industry profits.

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