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A significant majority of the CFOs surveyed by global professional services firm Deloitte have given a thumbs-up to the Goods and Service Tax (GST), stating that implementation of this indirect tax reform has had a positive impact on overall business. This appreciation of GST’s value proposition comes on the eve of India completing one year of GST implementation.
Over 250 CFOs with revenues spanning from less than Rs 250 crore to more than Rs 10,000 crore, responded to the Deloitte India CFO Survey 2018. The respondents included listed and unlisted companies from both the private sector and PSUs, Indian companies and MNCs headquartered in India as well as overseas.
GST IMPACT
Seventy-seven per cent of the CFOs believe that GST has had a positive impact on overall business. Additionally, GST has had a positive impact on the revenue (71 per cent) and supply chain (70 per cent), and 58 per cent CFOs felt it had led to an improvement in ease of doing business. On the other hand, industry has witnessed a negative impact (as responded by 66 per cent CFOs) on working capital post-GST implementation.
TOP CHALLENGE
In terms of the external environment, the survey reveals that regulatory and policy changes such as IndAS, demonetisation or GST, are the biggest concerns for CFOs. Technology disruption is also an important concern, as revealed in the survey. Companies have seen numerous technological disruptions and will continue to encounter the same in coming years.
As much as 89 per cent of the CFOs highlighted GST as a top challenge and saw it as a key regulatory change faced by the company. Rightly so, given that GST had brought about changes not just in technology, systems and reporting, but has also necessitated a relook into the existing business models impacting each and every aspect of business.
The other top challenge seen by CFOs is that IndAS aligned with International Financial Reporting Standards has been introduced, dealing mainly with revenue recognition. The new revenue standard brings in a comprehensive and robust framework (five-step model) for recognition, measurement and disclosure of revenue. This standard would change the manner in which companies recognise and report revenues.
Interestingly, the survey highlights that changes in the regulatory environment has added to the cost of compliance. As much as 49 per cent of the CFOs surveyed witnessed a challenge in terms of increased cost of meeting the regulatory requirements, the survey showed.
ECONOMIC OUTLOOK
India’s short and medium-term economic outlook remains optimistic. While two-thirds of the respondents are positive about economic prospects in the near term, the percentage jumps to 94 per cent over the next 2-3 years.
Positivity among investors about the economic outlook over the medium term is reflected in the risk appetite of Indian businesses. 57 per cent of CFOs are now willing to take greater business risks, as the next couple of years are expected to be a period for consolidating gains from recent reforms, according to the Survey.
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