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What do you understand by ‘Windfall Tax’? Why has the Union government introduced such a tax recently? Examine its significance for resource mobilization for the country.

Topic: Economy: Resource Mobilization

5. What do you understand by ‘Windfall Tax’? Why has the Union government introduced such a tax recently? Examine its significance for resource mobilization for the country. (250 Words)

Reference: The Hindu

Difficulty level: Easy

Why the question:

Recently government introduced a windfall tax due to rising crude prices, on the refining companies. In early August, Antonio Guterres, the United Nations Secretary-General, sharply criticised the “grotesque greed” of big oil and gas companies for making record profits from the global energy crisis on the back of the world’s poorest people. He urged all governments to tax these excessive profits.

Key Demand of the question:

Explain the concept of the windfall tax. Examine its significance and a few limitations.

Structure of the answer:

Introduction:

Give a brief introduction of what is Windfall tax.  and.

Body:

With data/stat show why was it introduced in India? Has it helped India? How has the experience been in other countries?

Next, give a few limitations of such a tax for resource mobilization for the country.

Conclusion:

Conclude with a way forward and need to depend on a regular source of resources.