There have been some media reports which states that ‘Oil Ministry seeks windfall tax review’. The reports, quoting Ministry of Petroleum & Natural Gas’ letter of August, 2022 have stated that the Ministry has sought changes in the levy of Special Additional Excise Duty (SAED).
These reports are misleading. It is clarified that the levy of SAED from 1st July, 2022 was accompanied by Government’s announcement of a mechanism of fortnightly review. Six such reviews have already taken place since the levy of SAED. In the meanwhile, from time to time, Government has received representations and requests for clarifications in respect of modalities of levy, rates, determination of liability, etc. These necessitate consultations as well as exchange of information between different Ministries of Government including the Ministry of Finance and Ministry of Petroleum and Natural Gas. Such consultations are an on-going process and are used to inform successive reviews.
Selective leakage of any such communication, including one which is six weeks old, without knowledge of context, background or communications made previously or thereafter gives a misleading impression and provides an incomplete picture. Such mischievous reporting is totally uncalled for and raises doubts about the motive behind such reporting.
By its very nature, SAED (or windfall tax, as it is commonly referred to) represents a response to a dynamic situation. Recalibration is therefore required and the design provides for the same based on market inputs and feedback.
Crude oil prices have witnessed extreme volatility in 2022. This has resulted in very high prices for end consumers at petrol pumps. Countries around the world have implemented various measures to mitigate the adverse impacts on consumers. “Windfall tax” is one of the measures which helps in dealing with the situation. The extent of its applicability, reference period, amount of cess/ tax/ duty, incidence of tax liability, mechanism for review are integral to such a tax.