Study of Taxation in the purview of How India’s Tourism Economy is Currently Under Utilising its Productive Capacity

 
My parents recently took a leisure trip to Europe for three weeks. And it goes without saying that they shopped from the local European brands. But, one thing struck them really hard about the shopping and tax rules. No foreign national is required to pay the local taxes levied on the purchase of domestic goods. And even if they are charged for the good with the tax, they can claim the tax refund from the last airport from which they are exiting that country by furnishing bills of proof of purchase.
Interestingly enough, giving this law a deeper thought only makes the underlying intent of the administration much clearer. What does come out as an important observation from this policy is that the government is in full mood to promote domestic production by inducing foreign nationals to purchase domestic brands tax-free. At another level, giving this a policy a read between the lines, I wonder what the general behaviour of a foreign tourist towards such countries is like.  
A country, say Italy, charges 8% municipal tax on all the goods sold in their markets, branded or unbranded. This tax is mandatorily paid by the citizens of Italy to the domestic, municipal authorities on every good they consume. So, it is quintessentially an indirect tax. But for foreigners, this tax is refunded at the last airport (in hand-to-hand cash refund, as well as by a bank transfer of the return) from which the tourist is exiting Italy. Well, as a rational consumer, if I am getting good at a tax-free price in Italy, and the same good with taxes levied to it, in any other country, my general tendency will command me to purchase that good from Italy.
To derive a macro-level conclusion from this about the tourism industry, one important assumption that we can artistically make in this analysis is that the availability of cheaper and better quality, exotic goods in a foreign country is an essential inducement for people to tour that country. In this scenario, it becomes exceedingly clear that the general behaviour of any consumer will be to take tours of a country where she gets cheaper, better quality goods.
Well, here comes into play the general perception of people about the imposition of taxes. Behavioural economics testifies that the general nature of people towards taxes is to evade them or escape out of their burden. Thus, if we try and link the general behaviour of a tourist to this, then an easily drawable conclusion would be that a consumer’s general tendency to choose a country to travel to will be to select a country were the tourist tax norms are easy and favourable. So, given a choice between Italy and India, for instance, a potential tourist is more likely to choose Italy over India.
This brings us to the final metric of analysis of the article. Is India’s present state of functioning in the tourism industry really in the area of underutilising the real productive potential? Well, with the given analysis, I would say, yes. A general tendency of the consumers is to choose a country, unlike India, where the tax norms are easy for the tourists. In India, the indirect taxation system after the implementation of GST does not differentiate between domestic and foreign consumers. So, in our markets, both are treated alike, and both are subject to the same rules of taxation.
So, when a consumer knows this at the back of her head, then she is more likely to evade paying a higher amount for goods by touring in India when she has an existing option of travelling elsewhere, where she may find the rules of taxes flexible with her identity as a foreigner. Thus, a clear indication that we can take from this is that India can do much better, assuming the state of other industries constant, in the tourism industry, by making a few accommodative changes in its tax policies for foreigners. Well, what they might be is beyond the scope of this article. Still, the initial task that we began with, to analyse if the tourism industry is underutilising its potential, then I believe we have done a fair job in establishing that yes, it is.