On 12th October 2020, Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman announced measures of Rs 73,000 crore to stimulate consumer spending in the economy in an effort to fight the slowdown due to COVID-19 pandemic following lockdown. The measures included cash incentive schemes for employees in the form of ‘LTC Cash Voucher Scheme’ (LTC Scheme) and ‘Special Festival Advance Scheme’ (Festival Scheme).
LTC Cash Voucher Scheme
Central Government employees get LTC in a block of 4 years in which air or rail fare, as per pay scale/entitlement, is reimbursed and in addition, Leave encashment of 10 days (pay + DA) is paid. But due to COVID-19, employees are not in a position to avail of LTC in the current block of 2018-21. Therefore, the Government has decided to give cash payment in lieu of one LTC during 2018-21, in which:
- Full payment on Leave encashment and
- Payment of fare in 3 flat-rate slabs depending on class of entitlement
- Fare payment will be tax free
An employee, opting for this scheme, will be required to buy goods / services worth 3 times the fare and 1 time the leave encashment before 31st March 2021.
The scheme also requires that money must be spent on goods attracting GST of 12% or more from a GST registered vendor through digital mode. The employee is required to produce GST invoice to avail the benefit.
Who can take the benefit of the Scheme ?
Central Government employees, Employees of Public Sector Banks (PSBs) and Public Sector Undertakings (PSUs) will also be allowed this facility. The tax concession will be allowed for State Government/Private Sector too, for employees who currently are entitled to LTC, subject to following the guidelines of the Central Government scheme.
Consumer Demand Infusion by LTC Cash Voucher Scheme
The demand infusion in the economy by Central Government and Central PSE/PSB employees is estimated to be Rs. 19,000 crore approx. The demand infusion by State Government employees will be Rs. 9,000 crore. It is expected that it will generate additional consumer demand of Rs. 28,000 crore.