On Monday, in a press conference to address economic issues, Finance Minister Nirmala Sitharaman announced proposals to stimulate demand in the Indian economy.
As part of the initiative to increase consumer spending, the FM announced an LTC Cash Voucher Scheme for government employees.
Sitharaman said that government employees and many of those working in the organised sector employees have escaped the economic effects of the pandemic, and their protected earnings/increased savings could be utilised to benefit the less fortunate.
Under the LTC (Leave Travel Concession) cash voucher scheme, since the LTC otherwise utilised by government employees in a block of 4 years but cannot be done in the current block of 2018-21:
- in lieu of one LTC during 2018-21, a cash payment will be made:
- full payment on leave encashment
- payment of a fare in 3-flat rate slabs
- fare payment will be tax-free
- If an employee is opting for the scheme, he/she will be required to
- Buy goods/ services worth 3 times the fare and 1 time the leave encashment
- Do it before 31 March 2021
- The money will have to be spent on
- goods attracting GST of 12% or more from a vendor through digital mode
- GST Invoice will be required to be produced
Tax concession will also be allowed for state government employees and those who work for the private sector, if they are entitled to LTC and are subject to guidelines form the Central Government.
As per Finance Ministry's estimate, if central government employees opt for it, the cost will be Rs 5,675 crore and if employees of public sector banks and other public sector units also opt for it, the estimated cost will be Rs 1,900 crore.
Further, demand infusion in the economy by Central Government, PSB and PSU employees is estimated to be Rs approximately Rs 19,000 crore, with demand infusion from state government employees being Rs 9,000 crore. The ministry estimates an additional consumer demand generation of Rs 28,000 crore.