The Finance Ministry on Tuesday clarified reports (including one in ETMarkets.com) that raised doubts over the usefulness of its LTC voucher scheme, saying it actually offers government employees an option to “spend on something other than travel” the money that one may fail to claim for being unable to travel.
The ministry said analysts raising doubts over the scheme were basing their arguments on the erroneous assumption that leave travel money can be retained by paying income-tax without travelling.
“The government LTC is quite different from Leave Travel Allowance in the corporate sector. A person claiming LTC is not eligible unless he actually travels; if he fails to travel, the amount is deducted from his pay and he may be liable for disciplinary action. He does not have the option of keeping the money and paying income-tax,” the ministry said in a statement.
Under the government system, the employee had only two choices: 1) Travel and spend (and the incidentals like hotel, food, etc. are to be incurred by him) or 2) Forgo the entitlement if not claimed within the date. “Now a third option to ‘spend on something other than travel’ has been given. In the current Covid environment, travel carries serious perceived health risks,” the ministry said.
About the requirement under the scheme for the beneficiary to spend on goods that attract a GST of 12 per cent or more, the ministry said assumptions that employees would otherwise not pay GST when they purchase something with their money and are only incurring it because of the scheme is ‘surprising’.
“Everybody pays GST on their consumption, unless one chooses to buy without bills in black, a practice the government obviously does not condone. Incidentally, the entitlements under the scheme have been worked out at full cost (i.e. including the GST element in fares),” the statement said.
“Precisely because central government employees are least impacted in terms of savings due to lockdown and no salary loss that they are in a position to boost their own spending on goods or services of their own choice, and using the LTC money effectively can mean a steep discount to reduce the cost of whatever they choose to buy,” the statement said.
Credit: Stocks-Markets-Economic Times