Winds of pain

What you need to know about the windfall tax on oil producers and what to do if you have oil stocks in your portfolio

What is this tax?

Effective July 1, domestic crude-oil producers are subject to a 'windfall' tax. A windfall tax is a special levy on the companies that have witnessed an extraordinary rise in their revenues and profits, owing to purely external circumstances or sheer luck and hence they supposedly do not have a moral claim to the full profits.

On whom has this been imposed?

The tax has been imposed on the domestic upstream oil companies whose margins and profits have been buoyed by the rising prices of crude oil. The government has claimed that the tax not expected to directly impact the retail price of petroleum products. Apart from this, additional taxes on the export of fuel and further restrictions on the quantum of fuel exports by refiners, such as Reliance Industries, were imposed to ensure adequate supply to the domestic market.