As for the leave encashment component of LTC, the employee will have to spend an equivalent amount towards the purchase of goods that attract GST of 12 per cent or more. Payment to be made digitally and GST invoice will be required to be presented.
Every four years, central government employees get LTC to any destination to their choice plus one to their hometown. "If you spend less of money, you will get less of benefit", he added.
To aid the economy, bruised by the coronavirus pandemic, the Centre on Monday announced a few measures for government employees. The employees of PSBs and PSUs allowed to avail this facility, and for PSBs and PSUs the cost will be Rs 1,900 crores.
Central public sector enterprises and banks will also follow the cue and give cash in place of leave travel concession (LTC) as travelling during the pandemic is near to impossible.
Also, Rs 37,000 crore of additional central and state capital expenditure will be incurred. LTC Cash Voucher Scheme The new LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs depending on the class on entitlement. If the private sector also chips in, additional demand for an equal amount can be expected.
Finance Minister Nirmala Sitharaman on Monday announced the government's two-pronged move to boost capital expenditure and stimulate consumer demand.
Under the Special Festival Advance scheme, Sitharaman said that the scheme will be available up to March 31, 2021 and will be given as a prepaid RuPay card. The amount is supposed to be recovered in maximum 10 instalments.
If central government employees opt for it, the cost will be around Rs 5,675 crore.
DK Srivastava, chief policy advisor at EY India said these limited direct expenditure commitments may boost private expenditure since the government employees have been incentivized to spend even though the scheme is beset with excessive conditionalities.
Under this scheme, employees can receive an interest-free advance of Rs. 10,000.
She said the government will also shore up investment by spending extra 250 billion rupees ($3.41 billion) on roads, ports and defence projects, and offering 120 billion rupees in interest-free 50-year loans to state governments for spending on infrastructure before March 31,2021.
Sitharaman went on to say that the one-time disbursement of Special Festival Advance scheme is expected to amount to Rs 4,000 crore.
Through the LTC consumption boost plan, the government expects a demand generation of Rs 28,000 crore in the economy.
During a news conference, Sitharaman said the government will give its employees income-tax-exempt cash vouchers in lieu of their entitled travel allowances this year.
She said festival advance along with other similar advances were abolished on the recommendations of the 7th Pay Commission.
"Supply constraints have eased, but consumer demand is still affected", she said, while giving details of the scheme consisting of two components - Consumer Spending and Capital Expenditure. She said of the Rs 12,000 crore, Rs 1,600 crore will be given to north-eastern states and Rs 900 crore will be for Uttrakhand and Himachal Pradesh. The second part involves Rs 7,500 crore for other states in proportion to share in Finance Commission devolution. The unutilised funds will be reallocated.