Government Reduces Windfall Tax on Diesel Exports Ahead of May 2026

Changes to Windfall Tax Rates

Starting May 1, 2026, the government has significantly lowered the windfall tax on diesel exports to ₹23 per liter. Additionally, the tax on aviation fuel has been adjusted to ₹33 per liter. According to a statement released late Thursday by the Finance Ministry, the export tax on petrol will remain at zero.

Current Tax Rates on Domestic Fuel

The ministry clarified that there will be no changes to the existing excise tax on petrol and diesel used domestically. Previously, the special extra tax on diesel exports was ₹55.5 per liter, which has now been reduced to ₹23. Similarly, the tax on aviation turbine fuel (ATF) has been decreased from ₹42 to ₹33 per liter.

Zero Tax for Initial Export Period

For the first 15 days starting May 1, the tax on diesel exports for road and development purposes will be set to zero. On March 26, the government had imposed an export tax of ₹21.50 on diesel and ₹29.5 on ATF, which was later increased to ₹55.5 and ₹42 respectively on April 11.

Reason Behind the Tax Implementation

The government introduced this tax amid ongoing conflicts involving the USA, Israel, and Iran to ensure a stable fuel supply within the country. The aim was to prevent companies exporting fuel from exploiting global price fluctuations. Following the onset of the conflict, crude oil prices surged dramatically, reaching approximately $126 per barrel, up from around $73 prior to the war. The ministry stated that this tax was implemented to maintain the supply of petrol and diesel in the country amidst rising tensions in West Asia.

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