Government Employees to Get Rs 10000 as Festival Bonus

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But unlike the LTC scheme, consumers would be free to spend the amount on items of their choice irrespective of GST applicability.

However, experts feel that the new alternative for LTC could be a dampener as the condition of higher spend may not find too many takers.

Announcing the measures, Finance Minister Nirmala Sitharaman said consumer spending and capital expenditure have been focused upon. This is where one can expect demand will get a boost by way of discretionary consumption, Ecowrap report said.

Sitharaman also announced a Rs 12,000 crore interest-free 50-year loan to states for spending on capital projects in a bid to boost economy. LTC is a benefit given to Government employees and private sector employees in the organised sector.

Employees opting for this scheme will need to spend money equal to three-times the fare and one-time the leave encashment amount. The amount needs to be spent on any good falling under GST rates of 12 per cent or above. However, the money must be spent on goods with GST of 12% or more from a registered vendor through digital mode - no cash transactions.

Under this new scheme, employees will get an equivalent amount despite not traveling. Further explaining that, Finance Secretary Ajay B Pandey said tax benefit on the fare component will be limited to deemed fare or one-time fare. This must be spent on items that have 12% GST or more; for instance, you can not use it to buy food that has 5% GST slab.

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Chandrajit Banerjee, director general of CII, said: "The two-pronged strategy will provide a huge impetus to spending both by consumers and government which in turn will accelerate economic activity". State governments have the option of offering festival advance on the lines of festival advance offered by central governments.

The repayment will be in 10 instalments, she said adding that Rs 4,000 crore is likely to be spent on this.

The Centre also revived a one-time festival advance scheme giving Rs 10,000 to every gazetted, non-gazetted government employee as a prepaid RuPay card to be used in any festival till March 31, 2021. In case of festival advance assuming it is taken in November and since it is returned in maximum of 10 instalments, four instalments will be paid back in this fiscal, thus leaving a burden of Rs 2400 crore to the exchequer, SBI's Ghosh said. The payment will remain tax-free and is to be done before March 31, 2021. This includes ₹2,500 crore for North Eastern States, Uttarakhand and Himachal Pradesh.

Further, Rs. 2,000 crore would be allocated to states which meet at least three out of four reforms announced earlier.

"Even if 50 per cent of the States opt to give this facility, we think that this will bring in Rs 9,000 crores", she added. This assistance would be over and above the additional borrowing. The minister also announced that an additional amount of 25 thousand crore rupees will be provided by the Centre through capital expenditure on roads, defence infrastructure, water supply, urban development and domestically produced capital equipment.

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