New Delhi: After Nasscom's representation on taxing companies engaged in business process outsourcing, the Finance Ministry is likely to come up with a comprehensive rule once the new Congress-led coalition Government assumes office.

"Kiran Karnik of Nasscom has given a representation to us. The Central Board of Direct Taxes may soon come up with a clarification," Revenue Secretary Vineeta Rai said on the sidelines of a tax conference of Assocham today (May 21, 2004). She said that the clarification on the taxation of foreign BPO units outsourcing some activities to India may come before the new Government presents the budget.

Nasscom wanted further clarifications on whether or not non-core activities of BPO companies should be taxed.

The move assumes significance as offshore BPO are slated to grow 65 per cent with earnings expected to touch $ 3.0 billion in 2004.

The Government had issued a circular in January on taxation of BPOs. It sought to provide tax exemptions in certain situations, where according to the principles of international taxation, the foreign companies became taxable on small and insignificant incomes in India," Rai said.

She said CBDT circular sought to grant exemptions in respect of incomes earned from non-core activities.

"It was issued to tackle the apprehensions of foreign companies regarding their taxability in respect on non-core activities," Rai said.

But the complexities involved in this sector was much more and industry apprehended that the circular was inadequate to deal with the tax problems, she said, while agreeing to review the present norms.