On or about 4 Aug 2021, the Inland Revenue Authority of Singapore (IRAS) has published in its website news on following investigations by the Commercial Affairs Department (CAD) and the Inland Revenue Authority of Singapore (IRAS). Six persons were charged today for their alleged involvement in perpetrating a Goods and Services Tax (GST) Missing Trader Fraud for about S$114 million in fictitious sales. This is the first prosecution involving such fraud.
In a typical GST Missing Trader Fraud arrangement, a group of businesses would form a supply chain where goods are sold through the chain. At each stop along the supply chain, the seller charges GST on the goods sold. The original upstream seller then disappears without paying the collected GST to IRAS, hence the term “Missing Trader”. In the meantime, the goods sold down the chain are exported by the last seller in the chain. Since exports are zero-rated, the last seller does not collect GST on the exports but instead claims a refund from IRAS on the GST paid on its purchases of goods. If IRAS refunds this last seller, it will result in a loss to the State because the Missing Trader did not pay the GST that he collected for his sale of goods at the start of the chain.
In some variations of such fraud, the same goods can be re-imported and re-exported repeatedly, also known as “carousel fraud”, explained SPF and IRAS.
From 1 Jan 2021, a GST-registered business that claims input tax on any supply made to them which it knew or should have known to be part of a Missing Trader Fraud arrangement, will be denied input tax and also be subject to a 10% surcharge on the input tax denied.
Companies are advised to perform due diligence checks and take appropriate actions to address the risks identified to avoid participating in transactions suspected to be part of a Missing Trader Fraud arrangement. For more information can refer to the e-Tax Guide “GST: Guide on Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud” on IRAS website.
Source: IRAS, 5 August 2021