India raises taxes on diesel and jet fuel exports by Rs 7 per litre, petrol sees levy cut
The Special Additional Excise Duty (SAED), commonly called the windfall tax, on diesel exports was raised by ₹7 per litre, moving from ₹8.5/litre to ₹15.5/litre
The SAED on Aviation Turbine Fuel (ATF/jet fuel) exports was also raised by ₹7 per litre, from ₹7.5/litre to ₹14.5/litre
The export levy on petrol was cut, from ₹4/litre to ₹2.5/litre
Duty rates on fuel cleared for domestic consumption were left unchanged; the revision applies only to exports
The changes took effect from the fortnightly review cycle, continuing the government's practice of adjusting the levy roughly every two weeks based on international crude prices
Special Additional Excise Duty (SAED) — India's Windfall Tax Mechanism
India introduced the windfall tax on 1 July 2022 as a Special Additional Excise Duty on domestically produced crude oil and on exports of refined petroleum products (petrol, diesel, ATF), after global crude prices surged past USD 100/barrel following the Russia-Ukraine conflict pushed refiners' export margins sharply higher than what they earned selling in the regulated domestic market. It is levied under the Central Excise framework (via notifications issued under the Finance Act/Central Excise Act provisions administered by the Central Board of Indirect Taxes and Customs), distinct from GST, which does not apply to petroleum crude, high-speed diesel, petrol, ATF, or natural gas — these remain outside the GST regime and continue to be taxed through central excise duty and state VAT.
Key Details
- Introduced: 1 July 2022; administered by CBIC under the Ministry of Finance
- Applies to: domestically produced crude oil (via SAED on crude) and refined product exports (diesel, ATF, and formerly petrol)
- Distinctive feature: reviewed and revised fortnightly (every two weeks) based on average international crude oil prices over the preceding period, rather than being a fixed annual rate like standard excise duty
- Objective: capture windfall/excess refining margins on exports and discourage refiners from prioritising export sales over supplying the domestic market when global prices spike
The July 2026 revision — raising diesel and ATF export levies while cutting the petrol levy — is a routine fortnightly SAED adjustment reflecting the latest movement in international crude and refined-product prices and refining margins.
Petroleum Products and the GST Exclusion
Petroleum crude, natural gas, motor spirit (petrol), high-speed diesel and ATF are among the five commodities kept outside the ambit of GST under the Constitution (101st Amendment) Act, 2016, even though GST subsumed most other indirect taxes. The GST Council retains the constitutional authority to recommend the date from which these five products would be brought under GST, but this has not yet happened as of 2026.
Key Details
- Article 366(12A), inserted by the 101st Amendment (2016), defines GST but explicitly carves out these five petroleum products
- Until they are brought under GST, they continue to attract central excise duty plus state-level VAT (rates varying by state) on domestic sales, and export-specific levies like SAED on exports
- This dual/multiple taxation structure is a distinct feature of India's indirect tax system relevant to any "one nation, one tax" discussion on GST
Because diesel, ATF and petrol sit outside GST, the Centre retains unilateral, frequently-revised excise-based tools like SAED to manage export incentives — a flexibility it would not have if these fuels were fully absorbed into the GST rate structure.
Refining Margins and Export Incentive Distortion
Gross Refining Margin (GRM) is the difference between the value of petroleum products a refinery produces and the cost of crude oil it processes, usually expressed in USD per barrel. When international product prices (especially diesel and jet fuel, driven by demand in Europe/Asia) rise faster than crude, refiners earn higher margins on exports than on regulated domestic sales, creating an incentive to divert supply abroad — the underlying economic rationale for a windfall/export tax.
Key Details
- India is a major net exporter of refined petroleum products (largely via private refiners) even though it imports over 85% of its crude oil requirement
- ATF and diesel are the products most sensitive to global refining-margin swings, given their weight in international trade of refined fuels
- The petrol export levy has historically stayed lower than diesel/ATF levies because refiners' export incentive on petrol is comparatively smaller
The steeper hike in diesel and ATF export duty relative to the cut in petrol duty signals that refining margins for diesel and jet fuel widened more than for petrol in the period under review.
- SAED on diesel exports: ₹8.5/litre → ₹15.5/litre (up ₹7/litre)
- SAED on ATF exports: ₹7.5/litre → ₹14.5/litre (up ₹7/litre)
- Export duty on petrol: ₹4/litre → ₹2.5/litre (down ₹1.5/litre)
- Windfall tax (SAED) mechanism introduced: 1 July 2022
- SAED review frequency: fortnightly, based on international crude/product price trends
- Domestic consumption fuel duty rates: unchanged by this revision
- Petroleum products excluded from GST under Article 366(12A): crude oil, natural gas, petrol, diesel, ATF (5 products)