“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.
‘No tax increase on beedi’
Addressing concerns raised by MPs about the impact on the beedi sector, Sitharaman categorically clarified that “not even a single paisa” of tax has been increased on beedis.
She listed details of the Labour Welfare Scheme for beedi workers, which includes:
- Healthcare through 10 hospitals and 279 dispensaries, with reimbursement available for major illnesses such as cancer and kidney-related diseases.
- Scholarships ranging from ₹1,000 to ₹25,000 per year for children of beedi workers.
- A housing subsidy of ₹1.50 lakh under the Revised Integrated Housing Scheme, now merged with PM Awas Yojana.
- Broader welfare schemes — including PDS, DAY-NULM, PM SVANidhi and PMKVY — also support beedi workers, she said.
Govt highlights health spending gains
The finance minister used the debate to showcase improvements in India’s health ecosystem. Citing NHA data, she said government health expenditure as a share of GDP rose from 1.13% in 2014–15 to 1.84% in 2021–22, while its share of overall government spending increased from 3.94% to 6.12%. Per capita health spending also tripled to ₹3,169 between 2014 and 2022.
Flagship schemes have played a key role, she said:
- Under Ayushman Bharat–PMJAY, more than 9 crore hospital admissions have generated ₹1.3 lakh crore worth of free treatments.
- Over 16,000 Jan Aushadhi Kendras now supply affordable medicines across nearly all districts.
- Mission Indradhanush has vaccinated 5.46 crore children and 1.32 crore pregnant women, contributing to a decline in Maternal Mortality Ratio from 130 to 80.
- India has significantly expanded medical education capacity, with 1.18 lakh MBBS and 74,000 PG seats added since 2014 and several new AIIMS established, including the first in the Northeast.
IMF’s ‘C’ grade due only to outdated base year, says FM
Responding to political criticism over the International Monetary Fund’s ‘C’ grade for India’s national accounts statistics, Sitharaman said the assessment is not linked to the credibility of growth numbers.
“The ‘C’ grade is solely because the national accounts still use the 2011–12 base year,” she said. The new base year — 2022–23 — will come into effect on February 27, 2026.
Sitharaman pointed out that the IMF’s main report highlights India’s robust fundamentals, including an expected 6.5% GDP growth in FY26, stable macroeconomic conditions, a resilient financial sector and inflation projected at 4.3% for the full year.
“The IMF report does not question the growth figures,” she said.
