Union Finance Minister Nirmala Sitharaman addresses a press conference on in New Delhi on Oct 12, 2020
Union Finance Minister Nirmala Sitharaman addresses a press conference on in New Delhi on Oct 12, 2020
PIB

The government on Monday announced giving out cash vouchers to central government employees this year in lieu of leave travel concession (LTC) fare which could be spent only on buying non-food GST-rated items.

Every four years, central government employees get LTC to any destination to their choice plus one to their hometown. Since travel is difficult to undertake during the pandemic, the government will pay the entitled fare as cash vouchers which have to be spent by March 31, 2021.

Finance Minister Nirmala Sitharaman said the employees could buy items that attract 12% or more goods and services tax (GST). These purchases will have to be made in digital mode from GST-registered outlets.

What is LTC Cash Voucher Scheme?

  1. Under LTC Cash Voucher Scheme, the Government has decided to give cash payment to employees in lieu of one LTC during 2018-21, in which full payment on Leave encashment and tax-free payment of LTC fare in 3 flat-rate slabs depending on class of entitlement will be given.

  2. 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 items bought should be those attracting GST of 12% or more. Only digital transactions are allowed, GST Invoice to be produced.

  3. The biggest incentive for employees to avail the LTC cash voucher scheme is that in a four-year block ending in 2021, the LTC not availed will lapse, instead, this will encourage employees to avail of this facility to buy goods which can help their families.

  4. Estimated cost of LTC Cash Voucher Scheme: For Central govt: Rs 5,675 crore; for PSBs & PSUs: Rs 1,900 crore.

  5. Tax concessions for LTC tickets available for state govt. & private sector too, if they choose to give such facility, these employees too can benefit.

  6. "Indications are that savings of govt and organized sector employees have increased, we want to incentivize such people to boost demand for the benefit of the less fortunate. The government expects the LTC cash voucher scheme to generate additional consumer demand in the range of Rs 28,000 crore," Finance Minister Nirmala Sitharaman said.

The government has also launched a "Special Festival Advance Scheme" for central employees. Here is what it means:

  • Special Festival Advance Scheme which was meant for non-gazetted government employees is being revived as a one-time measure, for gazetted employees too. All central govt employees can now get interest-free advance of Rs 10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021.

  • The one-time disbursement of Special Festival Advance Scheme is expected to amount to Rs 4,000 crore; if given by all state governments, another Rs. 8,000 crore is expected to be disbursed. Employees can spend this on any festival.

Note: An earlier version of this story said: "Under LTC cash voucher scheme, government employees can opt to receive cash amounting to leave encashment + 3 times ticket fare, to buy something of their choice. The items bought should be those attracting GST of 12% or more. Only digital transactions are allowed, GST Invoice to be produced."

It has been updated after clarification from PIB.

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