13 Feb 2009

Mr Teo Kiok Seng ("Teo"), was charged in court with assisting United Team Enterprise Pte Ltd ("United Team") to defraud the Comptroller of GST (CGST) of $1,038,241.50 in taxes between 1996 to 2007. He had falsified a total of 128 GST returns.

Teo began as the director of United Team from 31 March 1993 to 21 July 2003. On 22 July 2003, Teo relinquished his directorship to take on the accountant role but continued to submit the GST declarations on behalf of United Team. He was responsible for submitting the GST declarations for United Team ever since the company became a GST-registered trader with effect from 1 April 1994.

The principal business of United Team, as registered with ACRA, was General Wholesale Trade (including imports and exports).


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.

IRAS' investigations revealed that Teo had submitted fictitious input tax claims in United Team's GST returns for the periods ending 30 September 1996 to 30 April 2007, when in reality, the company was dormant during those periods. He falsely declared export figures and purchases with GST incurred in order to make fictitious refund claims on GST, when in fact there were no business activities.

Teo admitted that he had obtained fraudulent refunds from the CGST to repay his debts after his business failed, and had continued to defraud CGST even after having cleared his debts.


Court Sentences

Of the 128 charges, 40 were proceeded on, with two charges withdrawn and the remaining 86 charges taken into consideration. Teo pleaded guilty to 40 charges of assisting United Team to evade tax, by making false entries in his GST returns, an offence under section 62(1)(b) of the GST Act.

The Court sentenced Teo to 2 months each for the 40 charges proceeded on - 12 charges (Charge nos 113 - 124) to run consecutively, remaining 28 charges to run concurrently, which gives a total of 24 months of imprisonment; sentences to run consecutively from 6 Feb 2009.

The Court also ordered the accused to pay a penal tax assessed under section 48 of the GST Act of 3 times the amount of tax undercharged for the 40 charges proceeded on, which amounted to $1,535,940.00.


Penalties under the GST Act

Under Section 62(1)(b) of the GST Act, anyone who willfully with intent makes any false statement or entry in any return or application can be fined up to $10,000 or face imprisonment of up to seven years or both in addition to a penalty of three times the total tax undercharged.

IRAS would like to remind GST–registered traders and any person responsible for making tax declarations that IRAS takes a serious view on GST-registered traders who willfully make false claims for refund of input tax or under-charge GST on sales. Any person who commits GST fraud or assists others to commit GST fraud is guilty of an offence under the GST Act and is liable for prosecution. There is no time limit for the Comptroller to raise assessments to recover the tax loss arising from fraud cases, and to prosecute those who defraud the Comptroller..

Taxpayers are encouraged to review and disclose errors made in their declarations voluntarily. To encourage voluntary compliance, IRAS will impose lower penalties for errors disclosed voluntarily by taxpayers. Taxpayers who wish to disclose any errors made in GST declarations 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