As per the FM, the proposals are designed in such a way that they can stimulate demand by front loading some of the expenditure with some offsetting charges later.
Finance Minister Nirmala Sitharaman in a press conference on economic issues at National Media Centre, New Delhi, on Monday, proposed several steps to revive demand in the economy. As per the FM, the proposals are designed in such a way that they can stimulate demand by front-loading some of the expenditures with some offsetting charges later. Some other steps are directly in line to increase GDP
The consumer spending proposals will have two components – LTC cash voucher scheme and special festival advance scheme.
LTC cash voucher scheme
Leave Travel Concession (LTC) is available to government employees and organized sector employees. As per the government, the initial indications shows savings have increased during the lockdown in the country. The government now wants to incentivize individuals.
The LTC cash voucher scheme also includes leave encashment scheme.
“Private sector organisations can review their employee compensation structure to enable their employees to take advantage of the announcements, eg where there is an LTA component as part of the flexi-components in the CTC basket. Of course, this is subject to how the relevant Income tax rules are amended,” says Alok Agrawal, Partner, Deloitte Haskins & Sells LLP on LTC Cash voucher scheme.
To increase demand, employees can use the money to buy items attracting 12 per cent or more GST, increasing consumer demand. However, employees can spend LTC cash voucher only through digital mode and at places registered under GST before 31 March 2021.
The 7th pay commission doesn’t have the Festival Advance scheme but the government is reviving now. This time Festival Advance is not limiting to non-gazetted officers. The Festival Advance will be Rs 10000 to all central government employees to be repaid in 10 instalments. It will be given as prepay Rupay card to be used up to March 31, 2021, and it will be an interest-free amount.