Union Finance Minister Nirmala Sitharaman on Monday announced two measures to spur demand and boost spending in the economy. The measures are said to create additional spending of Rs 1 lakh crore. She said that consumer demand is affected whilst supply constraints have eased.
The two measures announced are:
1. Central government and private sector employees will now be allowed to use their Leave Travel Concession (LTC) tax-free benefit for purchases subject to certain conditions.
2. Public sector employees will be given an interest-free festival advance of Rs 10,000.
Here how you can use your LTC tax-free benefit:
Employees can now use the tax-free benefit on their LTC to buy goods than are in the 12% GST bracket or above. For example, if your LTC fare component is Rs 50,000. You would have to spend Rs 1.5 lakh on purchasing goods on which GST of 12% or more would apply.
However, if you don’t spend that amount, you will have to pay tax according to your marginal tax slab on LTC fare component.
This benefit is expected to boost GST collection that has been severely impacted by the Covid-19 pandemic and the drop in demand since the lockdown. It is expected that if the government and private sector employees avail the benefit, it would boost consumption and GST collection significantly.
Here how you can use your festival advance scheme:
As a one-time exemption, the government has reinstated the festival advance scheme. It was abolished under a recommendation of the 7th pay commission.
If you are a government employee, you can avail a festival advance of Rs 10,000 in a pre-loaded Rupay card that you can later repay in 10 instalments. This measure can boost demand ahead of the festival season.
The Finance Ministry expects to disburse about Rs 4,000 crore under this scheme and if states take part in this scheme, a total of Rs 12,000 crore may be disbursed as a result.
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