11 Feb 2009

Inland Revenue Authority of Singapore (“IRAS”) brought the sole-proprietor of Spares International (“SI”), Mr. Yeo Yue Yon Aerion Fabian (“Fabian”), to court this morning on 10 counts of offence under the GST Act.

Fabian faced 10 charges for making false claims of GST refunds from October 2004 to March 2007. The GST refunds fraudulently collected from IRAS amounted to $79,211.05.


Modus Operandi

GST-registered traders can offset the GST they pay on their purchases (input tax) against the GST (output tax) they collect from sales, and pay the difference to IRAS. If a business incurs more GST on purchases (input tax) than it collects from sales (output tax), it can claim a refund. Under the GST law, exports of goods and international services are zero-rated i.e. traders need not collect GST on the exports. However, a GST-registered trader who exports his goods overseas may still enjoy refund of the full amount of input tax as GST is incurred on the purchases.

The company, SI, is in the business of trading spare parts and accessories for motor vehicles and in general wholesale trade. As the sole-proprietor, Fabian prepared the ledgers every month, and these monthly figures are consolidated into quarterly figures for GST declaration purposes. Investigations showed that Fabian had inflated the GST input tax figures in his GST returns for the months of October 2004 to September 2006 to obtain refunds from IRAS, which he was not entitled to. He also correspondingly inflated the taxable purchases and zero-rated supplies figures in his GST returns.

Investigations further revealed that Fabian did not prepare any ledgers for the months of October 2006 to March 2007 and that he had declared fictitious figures in his GST returns for these months, also to obtain refunds from IRAS, which he was not entitled to.

Fabian admitted that he had obtained fraudulent GST refunds from IRAS as he needed money to settle his debts.


Court Sentences

Fabian was found guilty and convicted of

  1. Two charges of wilfully with intent to evade tax, by overstating input tax in his GST returns under section 62(1)(a) of the GST Act and
  2. Two charges of wilfully with intent to evade tax, by making false entries in his GST returns under section 62(1)(b) of the GST Act.

Six more charges of wilfully overstating input tax in his GST returns with intent to evade tax were taken into consideration in sentencing.

His sentences are as follows: -

Charge No. Summons No. Amount of tax undercharged Imprisonment term Sentencing to run
5 IRA 70/2008 $9,236.74 1 month Consecutive
8 IRA 73/2008 $9,391.04 1 month Consecutive
9 IRA 74/2008 $10,625.00 1 month Consecutive
10 IRA 75/2008 $10,522.80 1 month Concurrent

Court also ordered a penalty assessed under section 48 of the GST Act of 3 times the amount of tax undercharged of $39,775.58 ($ 9,236.74 + $9,391.04 + $10,625.00 + $10,522.80) in respect of the 4 charges. The total penalty amounted to $119,326.74.

GST traders must not make fraudulent claims

IRAS takes a serious view on GST-registered traders who wilfully make false claims for refund of input tax or under-charge GST on sales.

With the latest prosecution case, IRAS would like to remind GST–registered traders and any person responsible for making tax declarations that strong deterrent measures including prosecution will be taken against those traders who wilfully defraud GST.

Taxpayers are also encouraged to conduct reviews and disclose errors voluntarily. In the spirit of encouraging voluntary compliance, IRAS imposes lower penalties for errors disclosed voluntarily by taxpayers. Taxpayers who wish to disclose any GST errors made should write to:

The Comptroller of GST
Goods and Services Tax Division
Inland Revenue Authority of Singapore
55 Newton Road
Singapore 307987

Issued by Inland Revenue Authority of Singapore