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According to Collins dictionary, Windfall gain is “a profit that arises thanks to an external event over which the person profiting had no control”[1]. Windfall is a term that is used to mean any sudden phenomena which have taken place without any precedence. If we go literally, it denotes the blown down of fruit from a tree or of a tree by the gust of wind. As per the literal interpretation, a windfall can be categorized as ousting in nature. In the field of economy, it means any sudden increase or gain of something having high monetary value. Windfall gain can be procured by industries as well as individuals.

Windfall gains are usually huge, unprecedented gains which occur from any fortunate circumstances. Such types of gains or profits are above any historical norms. It may occur due to a price hike or shortage of supply that can be temporary as well as long-term also. Windfall gains are typically reaped by an entire industry sector, and they can also enter the way to an individual company. This is apart from the general purview of traditional cash inflow from Capital Appreciation, Interest, dividend, and Rent. Windfall profits may be gained from the usual source of income, any gift, sudden discovery, winning a lottery, or shortage in supply and it is often transitory. Any tariff system or other kinds of tendencies of regulation or policy from the government may also lead to windfall gains.


The precedence of earlier Windfall tax can be traced back to 1917 in the period of World War I.[2] Before America entered WWI in 1917, annual profits by U.S. Steel and DuPont annual were increased by more than 1,000% each, and pressure was grown for a “war efforts profit tax” which can be stated as a windfall tax. This was imposed in October 1917 this tax raised approximately 7 billion dollars in revenue. The 1980s in UK windfall taxes are often cited by the Conservative MPs as “unTory” and the preserve of the political was desperate to retrieve the cash in the form of a sur-tax from so-called “fat cats” making excessive profits.[3] In 1981 Thatcher’s then-chancellor, Geoffrey Howe blamed high street banks for getting away from the recession. An exceptional budget plan levy was introduced by him that creamed off 2.5% of the banks’ non-interest-bearing current accountdeposited to have an additional income of almost 400 million pounds which is comparable to approximately 1/5th of their total gains in that 1 year. The following year, the indifferent conclusion was drawn by the treasury officials when oil prices rose, and it imposed a special tax that generated around 2.4 billion pounds. The immediate reaction by the oil firms of the North Sea was negative and presumed a reduction in investment due to tax raise but industrial profits proliferated afterward.[4]

In the year 1990, Gordon Brown as chancellor vowed to stick by Tory tax commitments, forcing him to adopt a windfall tax to generate extra revenue. His aim was targeted at the privatized utilities at a highly discounted price under the Tories. The Tories were making huge profits from those monopolies of sectors whose control was transferred to them from the state. The price paid by the firms including BAA, British Gas, British Telecom, and Powergen was approximately 5 billion pounds.[5] Besides India, countries such as the United Kingdom, Italy, Germany, Mongolia, Spain, France, Belgium, Finland, Czech Republic, Romania, Greece, Slovakia, Netherlands, Poland, etc. have imposed windfall taxes in their respective nation.[6]


Windfall profits taxes are intended to tax the patron of a new or outside occasion; Hence, the tax did not depend on a standard, effectively thought and planned strategy, or production process of the organization – it is generally an oddball tax forced reflectively well beyond the typical tax rate. Windfall taxes are consistently talked about concerning products whose costs are profoundly unstable, like crude petroleum. Since the end of the previous year 2021, the cost of petrol, crude oil, gas, and coal has significantly increased. The conflict between Ukraine and Russia and the subsequent sanctions on Russia have made this increase even more pronounced.[7] COVID-19 has ignited in this enhancement. Because of this, energy industries have profited handsomely at the expense of consumers who now pay significantly higher prices for their energy use. The UN Secretary-General, therefore, asked nations to apply windfall taxes on those firms that have greatly benefited from the surge in the price of fossil fuels. As a result, numerous nations are considering imposing windfall taxes.[8] Refineries in India made profits drastically by importing discounted crude oil from Russia and exporting them to the country in demand. [9] They earned many high prices by exporting their oil overseas where they fetched better prices. Thus, the government has imposed an export tax to regulate this practice.


International crude oil prices have surged in the last few months. Domestic crude producers in India sell crude oil to domestic refineries also even at international parity prices. Recently, the crude oil price has touched $120 per barrel in the international market and because of this Indian refineries and crude oil producers made an unprecedented additional gain. Because of the Russia-Ukraine conflict Europe has boycotted oil imports from Russia to inflict sanctions. Europe faced an oil deficit as a consequence of the prior. India took the vantage of this scenario and bought a cut-price crude oil from Russia. Then the refineries were selling oils to Europe. It has benefitted India to the tune of Rs. 35,000 crores and refineries and oil companies have bagged a large profit.[10] The sudden outbreak of this conflict profited Indian oil refineries. On July 1, 2022, the center govt. imposed a windfall tax only on crude oil. Export duties on petrol and ATF are levied by the government at a rate of Rs 6 per liter or $12 per barrel, while in the case of diesel it was Rs 13 a liter or $26 a barrel. The Indian government imposed a windfall tax of Rs 23,260 per tonne or $40 per barrel on crude oil production. This windfall tax solely generated a revenue of Rs. 65,600 crores for the govt. By mid of July, the rates were changed to reduce as the international market was softening in the crude oil price. Revised rates are Nil for petrol, Rs. 4/litre for ATF, and Rs. 11/liter for diesel. Tax on the production of crude oil was reduced to Rs. 17000 per tonne. On 2nd August a second revision took place which scrapped the tax on petrol and ATF entirely and imposed Rs. 5 a liter for diesel. On 19 August center again imposed Rs. 2/litre for ATF and the tax for diesel got a hike of Rs. 7/litre. The indirect Exim curbs by duty tweaks aim to reduce the impending pressure on the current account deficit (CAD) and, thus, help the Indian rupee in return which is 82.29 on December 8, 2022.[11]


Frequent revision and instability between imposition and withdrawal of windfall tax draw the primary issue of investment by the producers. Huge volatility and unpredictability set back investors from financial speculation.

Bigger as well as smaller industries are participants in the Indian market. The lack of definition of Windfall taxes for this wide market creates a fallacy. The systematic scantiness of the rate and extent of the tax holds up to give an objective rationale and a high windfall tax for small companies appears unfair.


The imposition of windfall tax has brought definite changes in the macro economical segment. As discussed earlier the fortnight revisions of windfall tax can sustain governmental gain and can create issues on the other hand. Although currently this may be in a specific segment and running with uncertain regulations, nevertheless it impacts the Indian Tax System. Windfall tax is not defined under the Income Tax Act, of 1961 but it is levied in a disguise of excise duty. India is among the several countries imposing windfall tax. UK Finance Minister Rishi Sunak has imposed a windfall tax on the oil and gas segment.[12] Oil and gas companies have predominantly gained a lot well beyond usual, attracting the windfall tax upon them alone. Notwithstanding the adverse impact of a windfall tax on production, it can stabilize the market indices with the judicious utilization of the tax levied which ultimately sets back the negatives and secures economical endurance in India.

Author(s) Name: Abhradip Sinha (Amity University)


[1]Collins Dictionary ‘Windfall Gain’ <>, accessed 06 December 2022

[2]Phillip Inman,  ‘A brief history of windfall taxes: who used them and why’ (The Guardian, 26 May 2022) <> accessed 06  December 2022

[3] Ibid

[4] Ibid

[5] Ibid

[6] ‘Explained: What is windfall profit tax and why has it been imposed on oil and gas companies’ (Times of India, 01 September 2022) <> accessed 08 December 2022.

[7] Ibid

[8] Ibid

[9] ‘What Is Windfall Tax And Why Do Companies Have To Pay It?’ (Outlook India, 23 July 2022 ) <> accessed 08 December 2022.

[10] Ibid

[11] Ibid

[12] Ibid