What is Windfall Tax?

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India recently slashed the windfall tax on domestically produced crude oil to ₹4,100 per tonne from ₹6,400 per tonne.

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;


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