Manual vs Automated GST Filing: Key Differences, Challenges and Benefits

Goods and Services Tax (GST) filings have become a part of the routine workflow. Businesses are required to submit various GST returns, such as GSTR 1, GSTR 3B and GSTR 9, which can be filed either manually or through an automated process. This article will discuss key differences between the manual and automated processes of filing GST returns and related advantages and disadvantages.

Key Takeaways

1. An automated GST filing system reduces the risk of manual errors, thereby increasing accuracy and improving compliance.
2. Manual GST filing processes are prone to human errors, as data is prepared manually and various tools are required to file returns.
3. As a business scales, a business must consider adopting an automated system for filing GST returns.
4. Cost-benefit analysis is also required for each business before adopting an automated GST filing system.

What Is Manual GST Filing?

Manual GST filing is one of the common methods used by various taxpayers. This method involves preparing return details using tools provided on the GST Portal. 

Firstly, the business should collate data from its books of accounts and input the data in the above tools manually. This tool will check if there are any errors and omissions in the data, after which it will produce a JSON file, which can be uploaded directly on the GST portal. 

In case there are any errors even after uploading on the GST portal, the business must correct those errors and re-upload on the GST portal for verification. The business must check whether all details have been correctly recorded online on the portal (for instance, in GSTR 1 the business must check the number of B2B invoices uploaded in the portal and compare the same with books of accounts) and then file the return.

What Is Automated GST Filing?

Automated GST filing is an efficient way to file GST returns using data management platforms or software, e.g., Clear Platform and APIs. A business must record sales, purchases and expense entries with the software, which will validate the data on a real-time basis.

On filing returns with the GST platform, the software will automatically collate data and then present a brief summary. Once the business confirms, the software will upload the return data on the GST portal. Businesses may file such GST returns using APIs.

Key Differences: Manual GST Filing vs Automated GST Filing

Automated GST filing has a clear advantage over manual filing in terms of speed and accuracy. 

A business will need to download utilities and their updates thereafter when filing GST returns manually, whether monthly or quarterly. In automated GST filing the software is itself updated by the developer, which smoothens the filing process.

The process discussed in the manual GST filing is quite repetitive and at risk of human errors, while GST filings through an automated system ensure that errors are corrected on a real-time  basis, which improves the compliance accuracy.

Manual reconciliation of invoices in the GST portal and books also requires considerable time and effort for finding the differences. This is also streamlined in automated systems, as the invoices which are uploaded while filing returns are tracked. Accordingly, if any post-dated invoice is entered after filing returns, this system will automatically highlight such discrepancies.

Challenges in Manual GST Filing

Manual GST filings are subject to various errors, for instance, missed invoices and incorrect tax computation and HSN codes. The business must maintain month-wise reconciliations for errors and their corrective details, as these details may be required at the time of filing the annual return, i.e., GSTR - 9. 

It will be extremely challenging for a business to check for errors and maintain necessary reconciliations when there are large amounts of data, such as when they receive more than 200 invoices each month.

A business may also inadvertently claim ineligible or blocked input tax credit while filing GST returns, which may lead to unnecessary interest and penalties

Benefits of Automated GST Filing

The GST filing process is expedited by automated systems because errors are fixed during data entry. Additionally, because these systems make it simple to prepare different reconciliations, they assist businesses in identifying discrepancies.

A business can save time and resources with the automated GST filings. Automated systems are also useful when the business scales with various GSTINs and branches. Such a structure can comprehensively be supported by an automated filing process.

Cost Comparison: Manual vs Automated GST Filing

An automated GST filing system may cost a one-time setup fee and an annual recurring cost depending upon the service providers, along with one or two resources required to run such systems.

A manual GST filing system may require personnel depending upon the scale of business. For filing GST returns, a business with multiple branches might need four or five resources, whereas a small business might only need one. Hence, the cost for running a manual system is consultant fees or salaries of employees.

It is important to note that, even though a manual filing system might be more cost-effective for some businesses, the annual cost of penalties may be greater than that of automated systems if mismatches or errors are later discovered.

Impact on Compliance & Accuracy

An automated system improves compliance by ensuring sales and purchases invoices are correct and compliant with relevant GST laws before filing the GST returns. With clean and accurate filing of GST returns, the businesses face a lower risk of notices and penalties.

Which GST Filing Approach Is Better for Your Business?

Manual filing systems are suited for businesses with a low number of invoices or that operate only a single GSTIN. However, as the company grows with numerous branches and GSTINs, the time and effort required for GST compliance also increases, so the business should prefer automated systems for GST filings.