The government’s recent decision to abolish the retrospective tax shows that it is correcting a mistake made in the past, Prime Minister Narendra Modi said at the annual meeting of the Confederation of Indian Industry on Wednesday.

The retrospective tax, introduced in 2012, allowed the government to require companies to pay taxes on mergers and acquisitions that took place before May 28 of the same year. The tax has been at the center of disputes between the Indian government and companies like Vodafone and Cairn Energy. The two firms had won international arbitrations against the levying of retroactive taxes on them.

On August 5, the Center proposed to do away with the controversial tax law. To be eligible, businesses must withdraw all pending cases against the government and agree that no claims for damages will be filed by businesses that have been subject to the tax.

“It has been great to see the feedback and appreciation from the industry in this regard,” Modi said in his virtual speech. “It will increase trust between government and industry. “

The Congressional government passed the retroactive tax law in 2012. The National Democratic Alliance, which was in opposition at the time, called it “fiscal terrorism” and the late former finance minister Arun Jaitley had promised to abolish it.

At the event, the Prime Minister also said that India’s economy is picking up its pace amid the coronavirus crisis. “Labor code reforms, major reforms of trade laws and the opening up of various sectors have enabled India to receive record foreign direct investment,” he added.

Modi said his government had made “bold decisions” and reforms were also underway during the pandemic. “The government is making reforms not out of coercion but out of conviction,” he continued.