For the very first time, IRAS has exercised it newly acquired powers of arrest under the Section 83E(1) of the GST Act. During the 4-day nationwide raids on 36 business entities and 73 locations, about 10 suspected key members of a criminal syndicate have been arrested and 41 individual are assisting IRAS in the investigations. The suspected criminal syndicates are involved in GST carousel fraud.

Lawrence Eng, Assistant Commissioner of IRAS’ Investigation and Forensics Division, said, “The profile of tax evaders is changing. In the past, we investigated mainly business owners who failed to report their income fully, or who claimed certain expenses not allowable for tax purposes. Today, we are dealing with more organised groups whereby the members may have been involved in past criminal activities. Some suspects can be very uncooperative and post challenges to our operations; they will try to destroy paper documents or refuse to hand over important evidence. With our new powers of arrest, our investigators can be more effective in bringing the perpetrators to justice.”

GST Carousel Fraud

The same goods were traded from 1 company to the other and eventually exported to an overseas customer. While this seems to be a proper business transaction, it is actually controlled by one mastermind. In some instances, this is merely a paper exercise with no goods being actually exported.

To illustrate, a GST-registered Company A purchases the goods from an overseas supplier and imports them into Singapore. Company A will then sell the goods to another GST-registered Company B charging GST on the supply of the goods. However, instead of accounting and paying the GST collected to IRAS, the Director of Company A (also known as the fraudster) would go missing. The same goods are further sold to sham businesses acting as “buffer” companies before they are finally exported. The exporter company would then claim the input GST paid on the exported goods, which is effectively seeking a refund of the GST amount on a fraudulent supply chain — GST that the tax authority never received in the first place. The same goods could even be recycled through subsequent import and onward sales through new supply chains before final export, where the director behind the originating company of the new supply chain would go missing without accounting for GST. 

For some instances, the same goods which were supposed to be exported are subsequently sold in domestic markets without GST. This give an unfair competitive edge over other legitimate businesses which charge GST on the sales of goods.

IRAS take a serious stand on such fraudulent activities and will take stern enforcement actions against offenders.

Date: 15/11/2019

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