Over 200,000 central govt employees on auto makers' radar after LTC scheme

Many staffers may may want to take home a car, as scheme comes during the festive season when people are looking at buying big-ticket items

Carmakers are targeting the over 200,000 central government employees as they may purchase cars to avail benefits of the leave travel concession (LTC) scheme announced by the government earlier this month.
 
“While not all those eligible for the scheme will end up purchasing a car, it’s an opportunity for the marketers to tap into potential buyers, said Shashank Srivastava, executive director — sales and marketing — Maruti Suzuki India.
 
Central government employees account for 7-8 per cent in Maruti’s sales, he said. “Close to 220,000 employees are likely to purchase goods using the cash voucher scheme. This will also include those looking to buy a car,” he said.
 
This number could get bigger if the state governments also announce a similar scheme. The Delhi government announced a similar scheme on Thursday to boost consumption and expenditure.
 
“It’s a very good scheme and win-win for all. This (LTC) would have otherwise been foregone as no one wants to travel in this kind of an environment. One would see a surge in September and March as employees in the private sector will buy a car to claim depreciation benefit,” said Naveen Soni, senior vice-president, sales and service, Toyota Kirloskar Motor.
 
Salaried employees would otherwise not be entitled to a tax benefit on capital goods purchase.
 
The very fact that it has come during the festive season when people are looking at buying a big-ticket item, is an added benefit, he said.  The compact car segment has been growing at a brisk pace month-on-month. It advanced 36 per cent in September from 8 per cent in July and 27 per cent in August, he said.   
 
The move comes amid the pandemic-induced restrictions on travel. It gives government employees an option to avail the cash equivalent of the entitled LTC fare and leave encashment. The quantum of benefit ranges from Rs 36,000 to Rs 174,000, depending on the employees’ grade (see chart). This is inclusive of the entitlement for train or air fare and leave encashment. As part of the scheme, employees can “spend on something other than travel” and are eligible to purchase goods and services in lieu of the tax-exempt portion of the leave travel concession or leave travel allowances (LTC/LTA).
 
It only includes goods that attract more than 12 per cent GST. The government also announced a special festival advance scheme (of Rs 10,000) for central government employees to stimulate consumer demand.
 
For a person wanting to buy a car, this is how the scheme works: A grade II employee in a family of four is entitled to a return air fare in economy class. The benefit will be close to Rs 88,300 (air fare plus leave encashment).  To avail of it, the person will have to spend thrice the entitlement. If he or she is purchasing a car that has an ex-showroom price of Rs 460,000, the person will get Rs 88,300 as cashback from the employer.  An employee is eligible for LTC and leave encashment of 10 days for travel to home town or any other destination twice in a block of four years.
 
Carmakers have come up with schemes to lure government employees.  Maruti Suzuki has launched an offer for government employees with benefits up Rs 11,000 over and above the ongoing festival consumer offers across its models. To help employees avail the government scheme, Toyota is providing easy buying and finance options.