Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

Finance Minister introduces LTC Cash Voucher Scheme and Special Festival Advance Scheme makes a one-time comeback

  • Finance Minister Nirmala Sitharaman introduced two two schemes today to boost consumer spending in the Indian economy — the LTC Cash Voucher Scheme and the Special Festival Advance Scheme.
  • The LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs.
  • The new scheme will let employees use their fare allowance to purchase goods with 12% GST or more.

Finance Minister Nirmala Sitharaman is introducing new proposals to ‘stimulate demand in the economy’. According to her, the government’s previous policies addressed the needs of the poor. This time, the proposals are divided into two categories — consumer spending and capital expenditure.

“Supply constraints have somewhat eased, but consumer demand still needs to be given a bit of a boost,” she said.

Within consumer spending, there are two components — LTC Cash Voucher Scheme and the Special Festival Advance Scheme.

The Special Festival Advance Scheme was a part and parcel of government employees pay package up until the 6th Pay Commission. It’s introduction this year is a one-time come back to boost spending.

Impact of LTC Cash Voucher scheme:
Cost to central government ₹5,675 core
Cost to PSBs and PSUs ₹1,900 crore
Expected demand infusion by central government employees ₹19,000 crore
Expected demand infusion by state government employees ₹9,000 crore
Total expected addition consumer demand generation ₹28,000

“Our estimates are on the conservative side. We expect actual spend to be higher,” said Union Minister Tarun Bajaj.

LTC Cash Voucher SchemeThe new LTC Cash Voucher Scheme divides the LTC fare component into three flat-rate slabs depending on the class on entitlement. Any fare payment will continue to be tax free.

According to Sitharaman, savings have increased due to lockdown especially. “We would like to incentivise them to contribute to the revival of demand for the benefit of the less fortunate,” said Sitharaman.

Employees can use their LTC money to buy goods and services worth three times the fare and one time leave encashment before 31 March 2021.

However, the money must be spent on goods with GST of 12% or more from a registered vendor through digital mode — no cash transactions. Employees will be required to produce GST invoices.

Special Festival Advance SchemeThe revival of the Special Festival Advance Scheme will not be limited by rank or post, but be available to all central government employees. The amount has also been bumped up to ₹10,000 per person as compared to ₹4,500 in its last iteration.

It will be distributed as a Rupay prepaid card and be available until 31 March 2021. Employees will be able to pay back the loan in 10 instalments.

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