In a bid to help packaged software segment from double taxation, the government is working on ways to reduce the burden of levy on them.

"We are discussing on the modalities of their taxation. Right now there is no definite way of treating the packaged software as goods or services. We are finding out a way to tax them in a way so that they are not doubly taxed," said a Finance Ministry official.

As a remedy, the government could cut either service tax on the items or excise duty when classified as a good.

The Central Board of Excise and Customs has received representations from various software industry forums who are concerned with rising costs due to double taxation.

"We have received representations on the issue from many software manufacturers. Microsoft, Nasscom, MAIT and individual taxpayers have come to us," the official said.

One of the options the government is looking at is to treat a part of the value of the software as service and the rest as a good and then tax accordingly, the official said.

When downloaded, they attracts service tax, with downloading treated as a service. It again faces a duty when a licence for the software is taken, as a good. Term packaged software refers to a bunch of software offered to various PC marketing companies to come pre-loaded on branded computers under a licensing agreement.