Context: 

The Centre has cut windfall tax on domestically produced crude oil to one thousand 850 rupees per tonne from two thousand 100 rupees per tonne.

Background: 

Windfall tax, a relatively new taxation policy, was introduced in India in 2022

About Windfall tax:

1. Windfall tax is a special tax imposed by the government on companies that experience unexpected and above-average profits due to external events.
2. In India, this tax was introduced in 2022, primarily targeting the oil and gas sector, which saw significant profit increases due to global events like the Russia-Ukraine war.

Key Points About Windfall Tax in India:

Purpose:
The main aim is to redistribute unexpected profits that companies gain due to external factors, ensuring that these profits benefit society as a whole.

How It Works:
Windfall tax is levied as an additional tax over the regular corporate tax. It is typically calculated as a percentage of the excess profits that exceed a certain threshold.

Impact on Industries:

1. Oil and Gas: Companies like ONGC, Oil India, and GAIL have been significantly affected. The tax aims to curb excessive profits and ensure fair distribution.
2. Other Sectors: While primarily focused on oil and gas, the windfall tax can also apply to other sectors like mining and telecommunications if they experience similar profit surges.

Advantages and Disadvantages:

1. Advantages: Increased government revenue, fair distribution of wealth, and contribution to sustainable development.
2. Disadvantages: Market uncertainty, reduced business profits, and potential deterrence for investors.