Windfall Tax
Why in news:
- The government has made changes to the windfall tax on domestic crude oil production to simplify the tax system and encourage investments. The revised tax rate is now set at ₹6,400 per tonne.
- The government has raised the Special Additional Excise Duty (SAED) on crude petroleum from zero to ₹6,400 per tonne.
- This increase will not affect the SAED on petrol and Aviation Turbine Fuel (ATF), which will remain at zero.
About the Tax:
- A windfall tax is a type of tax that the government imposes on certain industries when they make unexpectedly high profits.
- A windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience significantly above-average profits.
- Windfall taxes are primarily levied on companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.
- The purpose is to redistribute excess profits in one area to raise funds for the greater social good; however, this can be a contentious ideal.
- Some individual taxes—such as inheritance tax or taxes on lottery or game-show winnings—can also be construed as a windfall tax.
Syllabus: Prelims
