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6 men charged for alleged involvement in GST fraud involving S$114 million of fictitious sales

6 men charged for alleged involvement in GST fraud involving S$114 million of fictitious sales

File photo of a gavel (Photo: Jeremy Long)

SINGAPORE: Six men were charged on Wednesday (Aug 4) for their alleged involvement in a Goods and Services Tax (GST) missing trader fraud involving approximately S$114 million in fictitious sales. 

This is the first prosecution involving such fraud, said the Singapore Police Force (SPF) and Inland Revenue Authority of Singapore (IRAS) in a joint media release. 

A missing trader fraud happens when a seller collects output GST on goods sold but disappears without paying it to IRAS. 

In the meantime, other parties in the supply chain continue to deduct input GST claims on purchases they have made. The products are then exported by the last seller in the chain. 

READ: More power for taxman to seize goods for investigations among changes to GST Act

"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," said the authorities. 

In some variations of such fraud, the same goods can be reimported and re-exported repeatedly, also known as "carousel fraud", explained SPF and IRAS.

An illustration showing GST missing trader fraud. (Graphic: SPF, IRAS)


In this specific case, a Singapore-incorporated company Nagore Trading purportedly sold high-value electronic goods amounting to approximately S$114 million to various businesses between February 2015 and January 2016. 

Nagore, which is a GST-registered company, charged GST on the sales. 

"Nagore is alleged to be a shell company with no real business operations and it was used to generate purchase orders and sales invoices to support the subsequent GST refund applications by the exporters," said the authorities. 

IRAS received claims in GST refunds which amounted to nearly S$8 million from Nagore's purported sales. 

Four men, allegedly behind Nagore's fraudulent operations, were each charged for being a knowing party to a fraudulent business and forgery of sales invoices. 

If found guilty of being a knowing party to a fraudulent business, the men each face a jail term of up to seven years, a fine of up to S$15,000, or both. 

Another man was also charged for allegedly assisting two of these individuals Nagore in committing forgery. 

If convicted of committing forgery, the five men may be jailed up to four years, fined, or both.

The authorities also said that another man, the director of two Singapore-incorporated and GST-registered companies, has been charged for his alleged involvement in the falsification of accounts.

He is alleged to have facilitated the fraud by allowing two companies, Ten Directions and Forte Communications, to purchase non-existent goods from Nagore.

If found guilty of being a knowing party to a fraudulent business, he can face a jail term of up to seven years, a fine of up to S$15,000, or both. 

He also faces an imprisonment term of up to 10 years, a fine, or both if convicted of falsification of accounts.

The police and IRAS said they take a serious view of GST missing trader fraud and "will take stern enforcement action against perpetrators of such arrangements".

From Jan 1 this year, any 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 per cent surcharge on the input tax denied.

"Businesses are therefore strongly 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," said the authorities.

Source: CNA/ad(ta)


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