Union Finance Minister Nirmala Sitharaman on Wednesday defended the September 2025 GST rate rationalisation in the Lok Sabha, citing a sharp rise in demand for automobiles, two-wheelers, and tractors, along with higher cement output, as evidence that the cuts had supported economic activity.
Replying to the debate on the Finance Bill 2026, Sitharaman rejected opposition criticism that the GST reductions had failed to deliver results. “Retail passenger vehicle sales jumped 26.1 per cent, the highest ever for any February month since GST,” she said, adding that rural passenger vehicle sales rose 34 per cent and two-wheeler sales increased 25 per cent.
Tractor purchases grew 36.4 per cent, while cement production rose about 9.3 per cent, with monthly GST collections also showing steady growth in recent months. The minister also highlighted that Tamil Nadu recorded SGST growth of 8 per cent in December 2025, 5 per cent in January 2026, and 18 per cent in February 2026 following the rate changes.
The GST rate rationalisation, implemented in September 2025, reduced tax slabs on several items, particularly in the consumer durables segment.
However, earlier research by the National Institute of Public Finance and Policy (NIPFP) had indicated that the transmission of GST cuts to consumer prices remained uneven. The study found that while prices of high-value durables such as air conditioners and vehicles declined following the rate reductions, prices of several frequently consumed items, including food, household goods, and personal care products, continued to rise in the subsequent months.
On MSMEs, the minister reiterated a “facilitate first, enforce later” approach, stating that technical lapses such as delayed audits would attract fixed penalties instead of prosecution. She also announced rule-based automation for issuing nil deduction certificates.
For agriculture and cooperatives, the Bill expands tax deductions for primary cooperatives supplying milk, fruits, vegetables, cattle feed, and cotton seeds, while dividend income passed on to members will receive favourable tax treatment. Indian fishing vessels operating in the exclusive economic zone and high seas will also be exempt from customs duty.
Sitharaman defended the continued use of cesses and surcharges, stating that the proceeds are fully deployed for state-focused schemes and, in recent years, utilisation has exceeded collections.
She also clarified that tax incentives for data centres are conditional on domestic infrastructure creation and local value addition, with investments estimated at $70 billion.
The minister further highlighted provisions in the new Income Tax Act, effective April 1, 2026, aimed at simplifying compliance, raising appeal thresholds, and reducing litigation, while reiterating the government’s fiscal consolidation path.
