Central Government has come up with a new scheme providing for some relief to employees in the country. As we all know, due to COVID-19 pandemic, people are not in a position to travel, and the employees earning Leave Travel Allowance (LTA) are unable to claim the respective exemption. So, keeping a view to let such persons claim LTA exemption and at the same time give a boost to the GST collection, the government announced a scheme, under which LTA exemption can be claimed if there is expenditure done by employees on the purchase of goods and services attracting GST.
Conditions to be fulfilled for claiming LTA exemption under the scheme
- 3 times the amount of LTA earned to be spent
- Goods and Services to be purchased from registered GST dealer
- Payments to be done only through digital modes
- All Invoices of the purchase has to submitted to the employer
Restrictions under the LTA scheme
For claiming exemption in current year, expenditure needs to be done before 31/03/2021 as the current pre-defined 4 year block is 2018-2021. In case, the amount remains unclaimed it can be utilised during 1st journey of next block.
To understand better, let us take an example of Mr. A, a non-Central Government employee.
| LTA Earned | ₹ 1,00,000 | Total expenditure on GST Purchase | ₹ 1,80,000 |
| No. of Family Members (Self + Spouse) | 2 | Total Eligible Exemption | ₹ 72,000
(36,000 x 2) |
| Total Amount to be spent
(36,000 x 2 persons x 3 times) |
₹ 2,16,000 | Total Allowable Exemption | ₹ 60,000
(72,000 x 1,80,000 ÷ 2,16,000) |
Hence, on payment at least ₹ 21,600 (1,80,000 x 12%) as GST, Mr.A gets ₹ 60,000 as LTA exemption.
Assuming Mr.A comes under 30% tax-bracket, his tax savings would be ₹ 18,000 (60,000 x 30%).
This clearly shows that it would be beneficial to purchase such eligible goods and services only if needed. Purchasing goods or availing services only for the sake of claiming the exemption would not be recommended.
As a result, it would not be incorrect to conclude that if one is anyway going to purchase eligible goods or avail eligible services one must do it before 31-03-2021, to avail tax benefits for the current Financial Year.
(This article represents the views of the authors only and does not intent to give any kind of legal opinion on any matter)
Authors:
CA Hardik Patel | Partner | Email: hardik.patel@masd.co.in
Rishabh Jain | Associate Consultant | Email: rishabh.jain@masd.co.in
Author Bio
Hello,
I have a query. I am describing it as under –
My joining date with my present employer is 18 Feb. Hence, my accrued LTC becomes overdue after 17 Feb of each year. I have not claimed LTC for the Period
18 Feb 2019 to 17 Feb 2020
18 Feb 2020 to 17 Feb 2021
During January 2021, I had purchased some white goods, which is through Digital Payment Mode and have GST 14%.
Now, I have placed my LTC claim with all bills and documents. Howeever, the agency which manages our Payroll, has declined the LTC Tax exemption claim and deducting Tax.
I had a talk and they were suggesting that claim request should have been placed between the period 18 Feb 2021 to 31 March 2021. Please tell whether they are correct.
Regards,
Debabrata
What exact document I need to submit if I travel by air. Is Online printout of air ticket and boarding pass in my name a good enough proof ? OR do they need additionally any bill/invoice proof that I have paid for this, like for example any credit card bill or if travel agent has booked – do they need any invoice from them?
Purchase after whic date is consoder for this?
1) 01 Apr 2018
2) 01 Apr 2019
2) 01 Apr 2020
Can Telephone Bills , Mobile Bills paid during the year can be submitted for this?
Whether Gold ornament purchase will be eligible for this GSt @3%
To claim LTA can I invest 3 times my eligible LTA in LIC premium ?
As single premium is attracting only 4.5% GST. I am comfused. Please guide
I think any goods and services having GST rates of 12% or more
Hi CA Hardik Patel,
Thanks for the article.
Can you please tell me what are the eligible purchases of Goods under GST for LTA Claiming ?
Please