The Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill, 2025, with Finance Minister Nirmala Sitharaman issuing a sharp rebuttal to opposition allegations that the legislation introduces a new levy or alters the tax burden on key sectors. Replying to the debate, the minister said the amendment merely updates an existing framework and does not impose any additional charge on consumers or states.

“This is not a new law, this is not an additional tax or something that the Centre is taking away,” Sitharaman told MPs, stressing that the duty in question is a pre-GST excise levy, not a cess. “Many MPs here observed that this is a Cess. This is not a Cess, this is Excise Duty. Excise duty existed before GST.”

She said proceeds from the duty will continue to be devolved to states in line with the Finance Commission’s formula.

Centre stresses fiscal support to states

Sitharaman underlined that the Centre has gone beyond statutory devolution in recent years, pointing to a 50-year interest-free capital loan facility extended to states after the Covid-19 pandemic on the direction of Prime Minister Narendra Modi.

“From 2020 till today, ₹4.24 lakh crore has been provided to the states. The Finance Commission did not ask us to do this,” she said, adding that every state receives at least what the Finance Commission mandates.

Strong defence of GST Compensation Cess use

The minister took exception to the allegation that the GST Compensation Cess had been misused to repay the Centre’s own debt. “I must express my serious objection to the observation that the Compensation Cess is being used to pay the Centre’s own debt,” she said.

The cess, she reiterated, was collected with the GST Council’s explicit approval to service the back-to-back loans raised to compensate states for revenue shortfalls during the pandemic. “I cannot believe that a constitutional body… would allow me to use the Compensation Cess to pay the central government’s debts,” she said, urging MP Sasikanth Senthil to withdraw his “baseless allegation.”

She also reminded the House that the compensation period was always meant to last five years, after which the cess arrangement would conclude.

Source: CNBC TV 18