Source: The post is based on the article “Oil Ministry seeks review of windfall tax, wants certain fields exempted” published in The Hindu on 20th September 2022.
What is the News?
The Oil Ministry has sought a review of the Windfall Profit tax on domestically-produced crude oil saying it goes against the principle of fiscal stability provided in contracts for finding and producing oil.
What is the Windfall Tax?
Why has the Oil Ministry sought a review of the Windfall Tax imposed on oil companies?
The Ministry of Petroleum and Natural Gas has sought an exemption from the Windfall Tax for fields or blocks – which were bid out to companies under the Production Sharing Contract(PSC) and the Revenue Sharing Contract(RSC).
This is because these contracts already have an in-built mechanism to factor in high prices as incremental gains get transferred in the form of higher profit share for the government.
Hence, levying Windfall Tax on these companies results in a situation where the operator ends up paying much more than the windfall gain itself.
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