The finance ministry is soon expected to issue a comprehensive notification on the type of services that will come under the tax net.

It will also clarify whether the payment for a service in convertible foreign exchange will constitute an export. Under service tax rules, exports do not come under the tax net.

Government officials said the notification would closely follow the World Trade Organisation's classification of movement of service across national borders under the General Agreement on Trade in Services. Though it defines four modes of providing services, it makes no reference to the nature of payments.

The ministry's move will also align the service tax regime with that of the commerce ministry. Under the Exim Policy, the commerce ministry uses the WTO definition to provide duty drawback and other benefits to service exporters.

Service tax experts said the revenue department will also have to provide some mechanism to service exporters, to draw Value Added Tax benefits.

This would be necessary as no country provides any VAT benefit for such exports.

Government officials said yet another reason to revise the service tax rules had to do with the fact that the country was coming closer to capital account convertibility. They said it will then be possible to pay for goods and services provided within the country, in foreign exchange.

They said continuing with the current provision of allowing a service to get export status based on the nature of payment, will therefore open up enormous possibilities of tax exemption.

The move follows representations made by industry, pointing out anomalies in making the current definition of service tax liability workable.

In February 2003, the finance ministry had done away with the proviso of exempting any service from tax liability if it were paid for in convertible foreign exchange. But in November, it had restored the situation as no alternate definition was found to be satisfactory.