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Reimposed a Windfall Tax On Domestic Crude Petroleum

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;