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.