No plan to impose windfall tax on oil companies

The government has no plan to impose an additional tax on profits of upstream oil companies, which have benefited from the rise in global oil prices because of the trade-parity pricing they follow, a top government official told FE. The UK and Hungary have recently imposed extra levies on oil companies in the form of the so-called “windfall tax”, in a bid to generate more fiscal resources, leading to speculation that India may follow suit.

Levying such a “windfall tax” is inconsistent with the government’s stated policy of having a stable tax regime, the source said. Also, the government would want the oil companies to step up their capital expenditure, rather than pay more taxes, the official added. Analysts reckon that windfall tax will not only dent the stability of the tax regime, but on a net basis may not yield much revenue gain for the government because it will lead to reduced dividend income from state-owned oil companies.