Once the Congress-led coalition government takes shape at the Centre, the finance ministry is likely to come up with a comprehensive rule on taxing companies engaged in business process outsourcing.
"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 in New Delhi on Friday.
Outsourcing and India: Complete Coverage
She said the clarification on taxing 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 is slated to grow by 65 per cent with earnings expected to touch $3 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 to non-core activities," Rai said.
But the complexities involved in this sector was much more and the industry apprehended that the circular was inadequate to deal with the tax problems, she said, while agreeing to review the present norms.
