Man involved in GST fraud involving fictitious sales of S$55 million sentenced to prison

MISSING TRADER FRAUD

Perpetrators of the GST fraud by missing traders are attempting to exploit the GST system to generate illicit proceeds through a series of bogus transactions, police and IRAS have said. These bogus transactions form the basis of fraudulent GST refund claims filed with IRAS.

Missing trader fraud occurs when a seller collects GST from sales but fails to pay the tax to IRAS. The seller is known as the missing trader.

Meanwhile, businesses further down the supply chain continue to claim VAT refunds on their purchases from the IRAS.

Tan and Yeo had admitted using M_Solution Trading – a shell company with no real business – to commit the fraud. Yeo also operated another company, Crescendo Hardware Trading, as part of the same fraud. Sia was the nominated director of M_Solution Trading.

Between September 2015 and December 2015, Tan and Yeo forged 90 sales invoices from M_Solution Trading for the alleged sale of goods worth approximately US$55 million.

It appears these goods were sold through chains of other companies, including Crescendo Hardware Trading, and ultimately to exporters, who applied to IRAS for GST refunds.

“These sales were a sham and there were no real sales or deliveries,” SPF and IRAS said.

GST was also charged on these sales, even though M_Solution Trading was only GST registered since December 1, 2015.

“These fictitious sales invoices were generated to support the subsequent GST refund claims filed by the exporters.”

In total, Tan and Yeo’s actions resulted in the filing of fraudulent GST refund claims worth approximately S$7.53 million. Of that amount, IRAS had paid out approximately S$2.04 million in GST refunds.

The police and IRAS have warned that they are taking strict action against GST fraud by missing traders and will take strict action against perpetrators of such fraudulent schemes.

From 1 January 2021, a GST-registered business that claims input tax on a supply that it knew or should have known was part of a fraud scheme by a counterfeit trader will be denied input tax. Instead, a surcharge of 10 per cent on the input tax denied will be charged.

The authorities strongly advise companies to conduct due diligence investigations and take appropriate measures to address the identified risks, in order to avoid participating in transactions suspected of being part of a missing trader fraud scheme.