As a major move in taxation of smooth functioning, the Lok Sabha passed the Taxation Amendment Bill to amend Finance Act 2012, kicking into motion scrapping of the retrospective taxation aspect of the law which taxes indirect transfers of Indian assets.

Finance minister Nirmala Sitharaman introduced the bill in Lok Sabha today (August 6)  stating reasons for making the changes to the provisions The Union Finance Minister described the 2012 legislation as “bad in law and bad for the investors' sentiments”.

The finance minister said there were 17 litigations due to the retrospective tax law and even the Supreme Court had said in 2012 that the tax could not be levied for the indirect transfer of shares of foreign companies. “The bill has been brought as a clarification,” she said.

Sitharaman said in 2014, the then Finance Minister Arun Jaitley had made a commitment to set up a high powered committee to look into the provisions of the 2012 law as the NDA government did not believe in retrospective taxes.

The finance minister said once the lawsuits were settled in Sept and Dec 2020, the government had started consultations with various stakeholders, including the Law Ministry.

The controversial retrospective tax law of 2012 was used to raise large tax demands on foreign investors like Vodafone and Cairn Energy. The statement of objects and reasons of the bill said the retrospective amendment "continues to be a sore point with potential investors".

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