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The Indian Government has ended the retrospective applicability of tax on indirect share transfers. The retrospective amendment introduced in 2012 had far-reaching consequences on indirect transfers undertaken prior to the 2012 introduction and led to litigation with significant amounts of tax contested. The 2021 amendment will nullify all tax-related demands pertaining to indirect transfers of transactions made before May 28, 2012. Further, it is expected to provide relief to prior investors subject to the tax because of the retrospective 2012 amendment.

The takeaway: Multinational companies that were impacted by the retrospective tax amendment involving indirect transfer of Indian assets undertaken prior to May 28 2012, now may end their litigation cycle on this issue and apply for a refund of past taxes paid. The nullification of the retrospective applicability of the tax was influenced by the pandemic’s impact on the economy and the need to boost investor confidence and promote foreign investment; these in turn could help fuel economic growth and generate employment.