LS passes Bill empowering Finance Commission to allocate state funds

The Lok Sabha on Wednesday passed the Central Excise (Amendment) Bill, 2025, after Finance Minister Nirmala Sitharaman reiterated that all states would get funds as per the decision of the Finance Commission. “No state will get lesser funds than what the Finance Commission decides,” the minister assured.

The minister noted that states had asked for a 50 per cent share in Central taxes but said this was for the Finance Commission to decide. The minister said 41 per cent of the excise collected would reach the states through the divisible pool, emphasising that the levy was an excise and not a cess.

On the Bill the minister explained “This is not a new law. This is not an additional tax. This is not something that the Centre is taking away,” during her reply to the discussion on the Bill. Sitharaman said the tax hikes she was proposing on cigarettes was not a cess but an excise duty, which would be part of the divisible pool of taxes that are shared with the states.