GST Return-Filing Delays and ITC Mismatches among Small-Business Clients of a Bengaluru CA Firm

Every month, a small chartered-accountant practice in Bengaluru chases dozens of clients for sales registers, purchase bills and bank statements so that GSTR-1 and GSTR-3B can be filed on time. When data arrive late, returns are filed late, late fees and interest follow, and input tax credit (ITC) claimed in the books often does not match what suppliers have reported in GSTR-2B. Interns see this problem every day but rarely measure it.

This internship project, done at Rao & Menon Associates (a fictional CA firm in Jayanagar, Bengaluru, handling about 120 GST-registered small-business clients), measures the extent of late filing and ITC mismatches over twelve months using the firm's anonymised compliance tracker, and combines it with a short questionnaire to 60 client owners on the reasons behind delays — late data, cash-flow problems, supplier non-filing, lack of understanding of the rules.

The analysis uses percentages and trend charts, chi-square tests (business type vs late filing), a t-test (ITC mismatch among monthly filers vs QRMP filers) and correlation (invoice volume vs days of delay). Findings lead to practical suggestions for the firm's client-onboarding and monthly data-collection process. The report is written for the BCU B.Com SEP 2024 course 6.6 Internship (Semester 6, 4 credits, at least 90 hours).

Abstract

GST compliance for small businesses depends heavily on timely data from clients and accurate matching of input tax credit with supplier-reported data. During a 90-hour internship at a Bengaluru CA firm, this study analyses twelve months of anonymised filing records for 120 client GSTINs and surveys 60 client owners. It measures delays in GSTR-1 and GSTR-3B, the share of ITC not reflected in GSTR-2B, and the reasons clients give for delays. Chi-square, t-test and correlation are used to test associations. The study recommends process changes for the firm and awareness points for clients.

Introduction

Under the CGST Act, 2017, a registered person furnishes details of outward supplies (section 37, GSTR-1) and a return with tax payment (section 39, GSTR-3B). Delays attract a late fee under section 47 and interest under section 50. Since the Finance Act, 2021 inserted clause (aa) into section 16(2), ITC is available only when the supplier has furnished the invoice details and they are communicated to the recipient, which in practice means they appear in GSTR-2B. Small businesses with turnover up to ₹5 crore may opt for the QRMP scheme, filing quarterly returns with monthly tax payment. For a CA firm, each rule translates into a monthly deadline and a reconciliation task.

Review of literature (summary)

Indian studies since 2017 describe GST compliance difficulties of MSMEs — frequent rule changes, portal issues and professional costs — mostly through owner surveys. Few studies use actual filing records to measure delay and ITC mismatch, and fewer still combine records with client reasons. Gap: a record-based measurement of compliance at the level of a practising firm's client base.

Existing vs proposed process at the firm

• Existing: reminders by phone and WhatsApp a few days before the due date; reconciliation of books with GSTR-2B done only when a mismatch is large.
• Proposed (from findings): a monthly data calendar per client, a reconciliation checklist before every GSTR-3B, and early warnings for suppliers who habitually file late.

Feasibility

• Time: 90+ hours over about six weeks, alongside routine internship work.
• Data: the firm allowed use of its tracker with client names replaced by codes; no GSTIN, PAN or invoice-level data leaves the office.
• Ethics: written permission from the firm's partner; voluntary, anonymous client questionnaire.

Rao & Menon Associates, a fictional CA firm in Jayanagar, Bengaluru, files GST returns for about 120 small traders, manufacturers and service providers. Partners estimate that a significant share of returns are filed after the due date because clients send sales and purchase data late, and that ITC claimed in books frequently differs from the credit visible in GSTR-2B because suppliers have not filed or have reported wrong details. Clients then face late fees, interest and, in the case of excess ITC, the risk of reversal with interest and notices.

The firm has no measured picture of how often and how late returns are filed, how large ITC mismatches are, which types of clients are most affected, and why. Without this, it cannot redesign its processes or advise clients effectively. This internship study measures filing delays and ITC mismatches over twelve months, relates them to client characteristics and filing frequency, and records the reasons clients themselves give for delay.

In scope

• About 120 GST-registered regular-scheme clients of one CA firm in Jayanagar, Bengaluru (composition dealers are excluded because they file different returns).
• Twelve consecutive tax periods of GSTR-1 and GSTR-3B filing dates, and monthly ITC as per books vs GSTR-2B, from the firm's anonymised tracker.
• A questionnaire to 60 client owners on reasons for delay and awareness of key rules.
• Internship learning: the firm's workflow, tools (GST portal, Tally Prime), and tasks performed by the intern.

Out of scope

• Legal opinions on individual cases, notices or litigation.
• Income-tax, TDS and ROC work of the firm.
• Invoice-level analysis or any disclosure of GSTIN, PAN or client names.
• Clients of other firms; results are specific to this firm's client base.

Research design

Descriptive and analytical study using secondary data (firm's compliance tracker) and primary data (client questionnaire), carried out during the 6.6 internship.

Data and sampling

• Records: a census of all regular-scheme clients in the tracker (about 120 GSTINs × 12 periods). Variables: business type (trader / manufacturer / service), filing frequency (monthly / QRMP), due date and filing date for each return, days of delay, ITC as per books, ITC as per GSTR-2B, invoice count per month.
• Questionnaire: population N = 120 client owners. Yamane's formula n = N / (1 + N·e²) with e = 0.10 gives 120 / 2.2 ≈ 55, rounded to 60. Systematic random sampling: every second client from the tracker list sorted by client code, starting from a random number, with replacement from the next client if someone declines.

Questionnaire design

Part A — business profile (type, years registered, filing frequency, who maintains books). Part B — reasons for delay: 8 statements (late sales data, late purchase bills, cash shortage for tax, supplier non-filing, portal issues, staff shortage, lack of understanding, festival/season workload) on a 5-point Likert scale. Part C — awareness of 5 rules (due dates, late fee, interest, ITC condition linked to GSTR-2B, QRMP option) as yes/no. Pilot with 8 clients; Cronbach's alpha for Part B ≥ 0.70.

Hypotheses (α = 0.05)

• H1₀: business type and late filing of GSTR-3B (late in ≥ 3 of 12 periods) are independent — chi-square test.
• H2₀: mean ITC mismatch % does not differ between monthly filers and QRMP filers — independent-samples t-test (Welch).
• H3₀: there is no correlation between average monthly invoice count and average days of delay — Pearson correlation (Spearman if skewed).
• H4₀: awareness of the GSTR-2B-linked ITC condition is not associated with ITC mismatch category (low/high) — chi-square test.

Tools

Percentages, averages, trend charts, weighted mean ranking of reasons, chi-square, t-test and correlation in Excel, optionally confirmed in Jamovi.

Timeline (≈ 6 weeks, ≥ 90 hours)

Week 1 orientation and workflow study · Week 2 tracker cleaning and anonymisation · Week 3 questionnaire pilot and collection · Week 4 analysis · Week 5 discussion with the partner · Week 6 report, log book and certificate.