LEAVE TRAVEL CONCESSION CASH VOUCHER SCHEME
GST Council meeting was held on Monday October 12th 2020. The Finance Minister came up with several proposals to stimulate demand in the economy, which is broadly catagorised two heads consumer spending and capital expenditure.
Consumer spending has two components i.e first one is the LTC Cash Voucher scheme and the second one is Special Festival Advance Scheme. The LTC cash Voucher scheme is aimed to boost consumer demand or spending.
Government employees and many organized sector employees have escaped the economic effect on the pandemic. Salaries of the same have been protected and ultimately the savings have increased. They should be encouraged to contribute to the revival of demand for the benefit of the less fortune.
Finance Minister announced that such employees can opt to buy goods/services worth 3x and 1 time the leave encashment under the LTC scheme.
Eligibility of this scheme- Goods and Services attract a GST 12% and more need to be bought before March 31st, 2021.
The estimated cost of the scheme for the Central Government will be Rs.5,675 crore and for PSBs & PSUs it will be Rs.1900 Crore. On a Conservative basis, we expect the LTC cash Voucher Scheme to generate additional consumer demand in the range of Rs.28,000 crore”.
It further announced that a tax exemption scheme which is an alternative to the currently available Leave Travel Concession facility.
To take advantage of the tax exemption, employees are required to purchase goods or services that are 3 times the amount that would be claimed within March 31, 2021 as a concession in respect of travel tickets.
However, Such goods or services need to attract a GST rate at 12% or more, and the payment for the same needs to be done through digital mode, it also needs to have a GST invoice. Saraswathi Kasturirangan, Partner, Deloitte India responded that “Since this benefit is available to private sector employees as well, it is important for companies to look at their policies around Leave Travel concessions and amend them in line with the above to extend the tax benefits to its employees”.
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