A day after taking the bold decision to scrap all retrospective tax demands and refund money collected, Prime Minister Narendra Modi on Friday said the move shows his government's commitment to providing businesses stability of investment climate and policy consistency.

Speaking at a meeting with the industry for boosting Indian exports, Modi said exporters know the importance of policy stability.

"The decision to abolish retrospective taxation shows government's commitment (to providing stable investment regime) and consistency of policy," he said.

His government had on Thursday introduced in the Lok Sabha a bill to scrap retrospective taxation that has spooked overseas investors and dented the reputation of Asia's third-largest economy.

India lost high-profile arbitrations initiated by companies such as Vodafone Group Plc and Cairn Energy Plc against levy of back taxes and risked its assets abroad being seized to enforce such tribunal awards.

'The Taxation Laws (Amendment) Bill, 2021' was passed by the Lok Sabha on Friday and is expected to be taken up by the Rajya Sabha next week.

"Exporters doing business in various countries know the importance of stability," Modi said, referring to the decision to abolish retrospective taxation.

The bill provides for the withdrawal of tax demands made on "indirect transfer of Indian assets if the transaction was undertaken before May 28, 2012 (i.e. the day the retrospective tax legislation came into being)."

"It is also proposed to refund the amount paid in these cases without any interest thereon," the bill said.