Petrol-Diesel Tax: Windfall tax on diesel and ATF reduced—will fuel be cheaper for you now?

The central government has provided significant relief to oil companies by reducing the windfall gain tax on the export of diesel and Aviation Turbine Fuel (ATF). The new rates came into effect today, October 1. However, this decision will not impact diesel prices in the domestic market, as the tax reduction applies only to exported diesel and ATF.

According to a notification issued by the Ministry of Finance, the Special Additional Excise Duty (SAED) and the Road and Infrastructure Cess on diesel exports have been reduced from ₹20 per litre to ₹16 per litre for the new fortnight beginning today. The SAED rate on ATF exports has been lowered from ₹15 per litre to ₹10.5 per litre. There has been no change in the windfall tax on petrol.

Why is windfall tax imposed?

Amid rising crude oil prices, the government first imposed a windfall tax on petrol, diesel, and ATF on March 27 to prevent private and public refineries from making 'super profits' by selling oil abroad instead of in the domestic market. The objective was to ensure an adequate supply of fuel within the country. The government reviews these rates every 15 days, adjusting them based on changes in global margins.

Will oil prices drop in the domestic market?

This reduction applies only to the tax on diesel and ATF exported by refineries. There have been no changes to the excise duty or local taxes applicable to petrol and diesel sold in the domestic market. In other words, customers will not get any relief on petrol and diesel prices for now. Crude oil prices in the international market have surged due to the US-Iran conflict. Unless crude oil prices return to pre-conflict levels, there is little likelihood of a drop in petrol and diesel rates.

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