Low collection of value added tax (VAT) on sale of cigarettes in Punjab is talking a toll on the government's campaign to control the incidence of cancer in the state. A major share of the tax levied on the sale of cigarettes is contributed towards cancer relief fund.

Sources said that the state government, through a notification issued on April 30, had made important changes regarding contribution to the cancer relief fund, established in 2011.

The fund was set up to award financial assistance to cancer patients in Punjab to get treatment in empanelled hospitals.

According to the new notification, the state government had made it mandatory for the department of excise and taxation to deposit 33% of total tax levied on sale of cigarettes towards the fund.

"However, since the import of cigarettes from other states had decreased due to very high VAT in Punjab, there is no substantial increase in tax collection as compared to last year. Due to stagnant collections, contribution to the cancer relief fund is not as much as we had expected," said a senior official.

"For the first five months of the current financial year, we were able to deposit Rs 18 crore to the fund. However, had the VAT not been hiked substantially, there would have been more import of cigarettes as compared to last year and hence more contribution to the fund eventually," he added.

Importantly, the fund percentage proportion of contribution through sale of cigarettes was quite high as compared to other sources.

While the government had directed all departments, semi-government institutions and local bodies to contribute 2% of the income generated from sale of their properties to the fund, it had made it mandatory to contribute 1% of the tender amount of all infrastructural projects, costing over Rs 50 crore each.

All societies, trusts, corporations and boards constituted by the state government were also told to deposit 2% of their total income towards the fund.