The Centre is expected to issue a service tax notification soon to clarify that business process outsourcing units, other than call centres, will have to pay an 8 per cent service tax.

Ministry officials said the notification would also set the date of commencement of payment for the 10 new services that had been brought into the tax net in the Budget for 2003-04.

Last year, the department levied service tax on new services from July 24, after Finance Minister Jaswant Singh made some changes in the Service Tax Act.

The officials also said the reason for the delay in bringing out the new service tax notification was to obtain feedback from industry on various aspects of the tax.

The department had issued a press note in early May, detailing the exemptions available for services meant for exports. These will also be incorporated in the notification.

The revenue department has decided that while business process outsourcing units will be taxable, call centres will qualify as export units and will remain outside the purview of service tax.

Similarly, business process outsourcing units meant to service activities which will be used abroad, will also be exempted from tax.

The department is also examining the possibility of allowing companies which pay service tax, to claim a tax deduction for expenses on mobile phones supplied to their employees.

While the companies get a rebate of 35 per cent for fixed line phones, the department is examining if a lower threshold can be given for mobile phones.

The gap in timing for new services also enables the department to iron out the chinks in the service tax legislation, which is a new area.

The detailed clarification will also set at rest the issue of why interest income on bank deposits are not taxable, while interest on credit card dues attract service tax.