Govt tightens export of oil, import of gold

„Windfall tax on domestic crude; 5% duty on gold

Worried about the plunging rupee amidst record high trade deficit and widening current account deficit, the government has tightened exports of oil and imports of gold, besides slapping a windfall tax on crude produced domestically.

The government on Friday imposed a tax of Rs 6 per litre on export of petrol and ATF and Rs 13 on diesel. The export tax is meant to deter companies like Reliance Industries and Nayara Energy from selling petroleum products in overseas markets and to improve local availability.

In addition, a Rs 23,250 per tonne windfall tax has been levied on crude oil produced domestically as companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) and Cairn Oil & Gas have made record earnings from the rising crude prices. This is expected to provide Rs 7,000 crore additional tax revenue on the 30 million tonnes of crude produced domestically. Refiners who produce less than 2 million barrels have been exempted from the new duties.

A windfall tax is a one-off tax on companies that have seen their profits surge extraordinarily from favourable market conditions. Recently, the UK levied a 25 per cent tax on "extraordinary" profits from North Sea oil and gas to raise $6.3 billion.

The basic customs duty

on gold bars has been increased from 7.5 per cent to 12.5 per cent while the duty on dore has been raised from 6.9 per cent to 11.85 per cent. Along with the agriculture infrastructure development cess (AIDC) of 2.5 per cent, the effective customs duty on gold bars will be 15 per cent. However, the government exempted the commodities from a social welfare

surcharge of 0.75 per cent. Hence, the net duty change will be 4.25 per cent. As gold attracts 3 per cent GST, the total tax incidence on gold bars will be 18.45 per cent as compared to 14 per cent earlier.

These measures are intended to save the plunging rupee which had dropped to record lows due to record high trade deficit and widening current account deficit (CAD.)

The country's trade deficit had touched an alltime high of $24.69 billion in May due to high gold and crude imports. In May, the country imported 101 tonnes of gold compared to 13 tonnes a year earlier. Different surveys have predicted that India's CAD will probably widen to 2.9-3 per cent of the GDP this fiscal.