Singapore GST – IRAS Investigating 43 Individuals on Suspected GST Carousel Fraud

It was reported on IRAS’ website on 18 August 2016 that a 2-day island-wide operation was conducted by IRAS on 15 and 16 August 2016.  Computers, mobile phones, SIM cards and business records at multiple locations including Tannery Lane, High Street and Kallang Pudding, were seized during the operation.  43 individuals are now assisting IRAS in the investigations for their suspected involvement in a GST Carousel Fraud.

What is GST Carousel Fraud?

Generally, in a carousel fraud, the same goods are traded around contrived supply chains within and in some instances beyond Singapore. These supply chains are typically controlled by one mastermind.

GST Carousel Fraud
Courtesy from IRAS website

To illustrate, Company A imports goods and then sells the goods to Company B and charges it GST for the supply of the goods.

The Director of Company A (aka the fraudster) would go missing without accounting for the GST that he should have transferred to the tax authority. The goods are further sold to bogus businesses acting as “buffer” companies in the supply chains.

The goods could be recycled through a series of companies, each liable to GST, and finally exported. The exporter would then claim input GST paid on the exported goods, which is effectively seeking a refund of the GST amount that the tax authority never received.

In some instances, no goods were actually exported and the business transactions were merely a paper exercise, with the sole aim of claiming fraudulent GST refunds. There are also some cases where some of these supposedly exported goods are then sold in the domestic market without GST which gives the fraudsters an unfair advantage compared to other legitimate businesses which charge GST on the sale of their goods.

What does this mean to you?

IRAS takes a serious view on such GST Carousel Fraud. IRAS will not hesitate to take stern enforcement actions against these traders and any intermediaries helping them. Anyone who commits the offence of wilful intent to evade or assist any other person to evade GST faces a penalty of up to 3 times the amount of tax undercharged and a fine not exceeding $10,000, and/or imprisonment of up to 7 years.

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