What is Windfall Tax?

About Windfall Tax:

• What is it? It is a higher tax levied by the government on specific industries when they experience unexpected and above-average profits.
• When is it imposed?
  • 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;

 

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Q1) What is Corporate Tax?

A corporate tax is a tax on the profits of a corporation. The taxes are paid on a company's taxable income, which includes revenue minus cost of goods sold (COGS), general and administrative (G&A) expenses, selling and marketing, research and development, depreciation, and other operating costs.

Source: Centre slashes windfall tax on crude oil to Rs 4,100 per tonne