Calcutta: The domestic retail industry has urged the government to consider a tax refund scheme for foreign tourists, which can improve both arrivals and foreign exchange earnings.

"We have made a representation where we are asking that there should be a GST refund for international tourists. Globally, there are many countries where tourists can get a refund for the amount of tax that they pay on purchases made in that country. Similarly, when a foreigner comes to India, the tax that they he/she has paid (on purchase of a product) could be given back. This encourages foreigners to come and shop in this country," said Kumar Rajagopalan, chief executive officer of the Retailers Association of India.

"If tourists come and spend money, there will be a significant increase in foreign exchange earnings as well. It is good for the hospitality and tourism industries," he said.

This practice is followed in many countries such as Thailand, Malayasia and Singapore where there is a significant inflow of international tourists.

Rajagopalan said exporters were already getting refunds on the GST paid and purchases made by foreigners may also be considered as "deemed exports" that are eligible for refunds if proper documents are furnished.

"Tax credit can be given back when they (tourists) go out of the country and prove that they have taken their purchase out of the country," he said.

One of the methods that can be considered is that tourists get a coupon from the retailers while making a purchase, containing details such as the passport number of the buyer and the invoice details of the transaction, including the GST paid. When the tourist goes out of the country, he can show the coupon and the product at the airport and either collect the refund at the airport or receive it in a specified transaction account.

According to estimates from the industry association, shopping currently accounts for only around 20 per cent of tourist expenditure in India compared with 46 per cent Japan, 40 per cent across the European Union and 36 per cent in Singapore despite the relatively higher cost of accommodation and services in these markets.

According to data from the tourism ministry, foreign tourist arrivals and foreign exchange earnings (in dollars) grew 10.8 per cent and 17.4 per cent, respectively, between January and April 2018 over the corresponding period of the previous year.

The Centre has set a target to increase India's share of foreign tourists in international tourist arrivals to 1 per cent by 2020 and 2 per cent by 2015. The number was 0.17 per cent in 2016.