India, Dec. 5 -- New Delhi

In a unique move of cooperative federalism, Union finance minister Nirmala Sitharaman on Thursday told the Lok Sabha that the revenue from the proposed capacity-based cess on pan masala will be shared with states to be used in "health-related" activities.

While introducing the bill in the House, the finance minister explained the reason for bringing two separate legislations for demerit goods -- the Central Excise (Amendment) Bill, 2025 on tobacco and its products, and the Health Security se National Security Cess Bill, 2025 on pan masala. She said a new cess has been proposed as excise could not be levied on pan masala on the basis of capacity.

Speaking about the cess, she said in Hindi: "Aur States ke sath ...