Dear Valued Clients and Readers
It was reported in IRAS’ website (see GST Fraud) that a sole proprietor was sentenced to jail and fined for S$413k for committing GST fraud.
The facts provided by IRAS were as follows:
1. The taxpayer was a sole-proprietor of his business in 1996 whose principal activities are wholesale of parts and accessories for vehicles. The business was registered for GST in 1998 and the taxpayer was responsible for the GST compliance for his business.
2. IRAS’ investigation revealed that the taxpayer had declared fictitious input tax claims in the relevant GST returns from September 2000 to September 2007 by adding transhipments goods of the business into the relevant GST returns under the value of taxable purposes although the fact was that no GST was incurred by the business. IRAS also found out that the taxpayer had burnt the physical copies of the records in order to impede IRAS’ investigations when he realized that IRAS requested records to assess the amount of tax undercharged.
3. Taxpayer finally admitted that he obtained fraudulent refunds from the Comptroller of GST due to greed. He pleaded guilty to 11 charges of creating false entries in the relevant GST returns to evade tax, and 3 charges for destruction of supporting documents. 18 charges of creating false entries were taken into consideration for sentencing. He faced a penalty of S$413K which is 3 times the amount of tax undercharged.
This case provided us with three important reminders for the purpose of GST compliance:
- There is no time limit for IRAS to initiate any recovery action for tax undercharged if fraud is committed on the part of the taxpayer.
- Input tax can only be claimed by businesses if they have incurred GST on purchases against their taxable supplies (including domestic sales and export sales) provided that the essential conditions for making claims can be satisfied.
Jack HM Wong
Founder and Lead Business & Tax Advisor
WHM Consulting Pte Ltd