Reimposed a Windfall Tax On Domestic Crude Petroleum:
The Indian government recently reimposed a windfall tax on domestic petroleum crude.
- Windfall Tax is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits.
- When the government notices a sudden increase in an industry’s revenue, they impose this tax.
- However, these revenues cannot be linked to anything the company actively pursued, such as its business strategy or expansion.
- Consequently, a Windfall Tax is imposed on an industry’s profits when it experiences a sharp increase in revenue due to unrelated external events.
- Rationale behind the imposition of windfall tax:
- Redistribution of unexpected gains, when high prices benefit producers at the expense of consumers;
- To fund social welfare schemes;
- As a supplementary revenue stream for the government;
- As a way for the Government to narrow the country’s widened trade deficit;