Windfall Tax Changes From July 1: Diesel, jet fuel export windfall tax cut, petrol levy raised: Here's what's new

State-run oil marketing company (OMC) stocks are set to take centre stage on Dalal Street in Wednesday's trade. After the market hours on Tuesday, the central government revised certain windfall tax rates on fuel exports, lowering the levy on diesel and aviation turbine fuel (ATF) exports while increasing the tax on petrol exports. The revised rates took effect from Wednesday itself (July 1).

The government notified the changes through a notification.

Under the revised structure, the windfall tax on diesel exports has been reduced to Rs 8.5 per litre.

The levy on exports of aviation turbine fuel (ATF) -- also known as jet fuel -- has also been cut to Rs 7.5 per litre.

On the flipside, the government has increased the windfall tax on petrol exports to Rs 4 per litre.

What are the revised windfall tax rates?

The government has notified the following changes:

• Diesel export windfall tax reduced to Rs 8.5 per litre from Rs 14 per litre
• ATF export windfall tax reduced to Rs 7.5 per litre from Rs 12.5 per litre
• Petrol export windfall tax increased to Rs 4 per litre from Rs 1.5 per litre

No change in fuels meant for domestic use

There is no change in the existing duty rates on petrol and diesel meant for domestic consumption.

What is a windfall tax?

It is an additional levy that the goverment imposes on OMCs that earn unusually high profits due to extraordinary market conditions rather than operational improvements. In the case of petroleum products, these taxes are normally linked to global crude oil prices, refining margins and export economics.

The government reviews these rates from time to time depending on prevailing market conditions.

These levies are designed to capture a portion of the extraordinary profits that refiners and exporters may earn due to sudden movements in global energy prices.

The main purpose is to discourage excessive exports when overseas sales become significantly more profitable than domestic sales, while ensuring adequate fuel availability within the country.

What is Special Additional Excise Duty (SAED)?

Formally known as Special Additional Excise Duty (SAED), this additional levy -- over and above the standard excise duty -- is specifically linked to the petroleum space.

It is applied to exports and windfall gains of domestic refiners and oil producers and can vary across different fuels.

The Centre collects these taxes as part of its broader excise duty framework.

When global crude oil prices or refining margins rise sharply, exporting petroleum products often becomes more profitable than selling them in the domestic market. And that's when refiners may have a greater incentive to export fuels, potentially tightening domestic supplies and putting upward pressure on local fuel prices.

By imposing or increasing SAED, the government seeks to balance export incentives with domestic fuel availability and price stability.

The revised export duty structure could influence the profitability of refiners and exporters, particularly those with a significant share of diesel and ATF exports.

IOCL, BPCL, HPCL shares in spotlight

On Tuesday, Indian Oil Corp Ltd (IOCL) shares edged up 0.1 per cent to close at Rs 139.4, Bharat Petroleum Corp Ltd (BPCL) shares rose 0.9 per cent to Rs 303.5 while the Hindustan Petroleum Corp Ltd (HPCL) stock gained 1.3 per cent to settle at Rs 394.6 apiece.