The Inland Revenue Authority of Singapore (IRAS) has reported the completion of more than 2,700 GST audits during 2025/2026, resulting in the recovery of approximately S$226 million in taxes and penalties. The audits covered businesses across various industries and identified weaknesses in GST accounting, documentation and transaction reporting.
IRAS has published selected audit cases to illustrate common compliance errors and highlight areas requiring greater attention from GST-registered businesses.The cases concern four principal issues: performance-based fees, credit note adjustments, transfers of goods between related companies and input tax claims associated with Missing Trader Fraud arrangements.
Key Audit Findings and GST Implications
1. Failure to Account for GST on Performance-Based Fees
Performance-based fees may arise from contractual arrangements under which a supplier receives additional consideration upon achieving specified results, targets or milestones. Where such fees constitute consideration for taxable supplies, GST must be accounted for in accordance with the applicable time of supply rules.
Businesses may understate output GST if they recognise only fixed contractual fees and overlook variable or contingent payments.
Practical implications
- Review contracts containing success fees, incentive payments, commissions or performance-based remuneration.
- Identify whether additional payments constitute consideration for taxable supplies.
- Determine the correct time of supply for each payment.
- Reconcile contract terms, billing records and GST returns.
2. Incorrect Issuance of Credit Notes Resulting in GST Understatement
Credit notes are generally used to adjust previously issued invoices where there is a genuine reduction in the consideration for a supply or another qualifying adjustment. Incorrectly issued credit notes may result in an unwarranted reduction in output GST.
Businesses should ensure that every credit note is supported by a valid commercial reason and is correctly reflected in their GST accounting records.
Practical implications
- Establish approval procedures for issuing credit notes.
- Link credit notes to the original tax invoices and relevant transactions.
- Verify that the adjustment is supported by contractual terms or other evidence.
- Reconcile credit note adjustments against GST returns.
3. Failure to Account for GST on Transfers of Goods Between Related Companies
Transactions between related companies are not automatically outside the scope of GST. Where goods are transferred between separate legal entities, the GST treatment must be determined by reference to the nature of the transaction, the consideration involved and the applicable statutory rules.
In particular, businesses should not assume that transfers are GST-free merely because the companies belong to the same corporate group.The treatment may differ where the entities are members of the same GST group or where specific statutory provisions apply.
Practical implications
- Identify transfers of inventory, equipment and other goods between related companies.
- Determine whether the transfers constitute taxable supplies.
- Review the applicability of GST group registration and any relevant exceptions.
- Maintain appropriate invoices, transfer records and valuation documentation.
4. Input Tax Claims Involving Missing Trader Fraud Arrangements
Missing Trader Fraud generally involves arrangements in which GST is charged within a supply chain but is not properly accounted for to the tax authorities. Businesses involved in such arrangements may face challenges to their input tax claims and potential enforcement consequences.
IRAS’ inclusion of these cases highlights the importance of verifying the legitimacy of suppliers and transactions rather than relying solely on the possession of tax invoices.
Practical implications
- Conduct appropriate due diligence on suppliers, particularly where transactions involve unusual commercial arrangements.
- Verify the commercial substance of transactions and the actual movement of goods.
- Maintain purchase orders, contracts, delivery evidence and payment records.
- Investigate unusually low prices, circular transactions and other potential fraud indicators.
- Escalate suspicious transactions for further review before claiming input tax.
Practical Lessons
The audit findings reinforce the need for effective GST controls throughout the transaction cycle.
| Compliance area | Recommended control |
|---|---|
| Performance-based fees | Review variable consideration and monitor GST reporting triggers |
| Credit notes | Require supporting evidence and approval before adjusting output GST |
| Related-party transfers | Assess GST treatment for each transfer and maintain appropriate records |
| Input tax claims | Verify supplier legitimacy, transaction substance and supporting documents |
| GST reporting | Perform regular reconciliations between accounting records and GST returns |
| Compliance monitoring | Conduct periodic internal GST reviews and address identified errors promptly |
Recommended Action
GST-registered businesses should review their GST compliance procedures in light of the audit cases published by IRAS. Particular attention should be given to transactions that may not be captured by routine sales and purchase invoice processing, including contingent fees, credit note adjustments and intercompany transfers.
Businesses should also strengthen supplier due diligence procedures and ensure that input tax claims are supported by genuine transactions and adequate documentation. Where errors are identified, companies should assess whether corrections or voluntary disclosures are required under the applicable IRAS procedures.
Conclusion
The recovery of S$226 million in taxes and penalties from more than 2,700 GST audits demonstrates the financial consequences of inadequate GST controls. The published cases show that GST compliance risks can arise from ordinary commercial transactions as well as potentially fraudulent arrangements.
For businesses, the key priority is to maintain effective transaction-level controls, accurate GST reporting and reliable supporting documentation.
Editorial Note
This article distinguishes ordinary compliance errors from Missing Trader Fraud arrangements. It does not suggest that every business involved in a suspicious supply chain is necessarily complicit in fraud; the legal consequences depend on the relevant facts and statutory requirements.
This article provides general technical information and does not constitute specific GST or legal advice. The GST treatment of transactions depends on their facts, the applicable legislation and prevailing IRAS guidance.
Source: IRAS, 16 September 2026.