Two businesses made wrongful GST input claims of $1.4m

The taxpayer claimed input tax of S$1,341,557 on the purchase of "Osperia" micro SD cards and flash drives (the "Goods") from [K] in its GST returns for the accounting period of 1 April 2016 to 31 August 2016 (the "Relevant Period"). Based on the Comptroller's audit, the purported supply chain was as follows:

Upstream Supplier [S]	Immediate Supplier [K]	Taxpayer	Malaysian Customer [EXT]
			Malaysian Customer [ETM]

The purported business arrangement and transactions exhibited several red flags. The Comptroller withheld the tax refunds for the Relevant Period and carried out a detailed audit. Eventually, the Comptroller denied the input tax claims on the basis that the Comptroller was not satisfied that there had been a supply and that these had not been genuine transactions. 

The Board dismissed the taxpayer's appeal against the Comptroller's decision. The Board's judgement (as upheld by the General Division of the High Court) is summarised as follows:

(a) The onus is on the taxpayer to prove that the Comptroller's decision was wrong.

(b) The evidence provided by the taxpayer were: (i) documentary evidence purportedly showing the receipt and on-sale of the Goods; (ii) oral testimony from representatives of the taxpayer and [K] that the Goods had been supplied; and (iii) photographs of items that looked like the Goods.

(c) However, all this evidence was not sufficient as the Board agreed with the Comptroller that the following red flags cast serious doubt on the veracity of the transactions:

(i) The sudden and anomalous surge in both the volume of transactions and value of the tax claims over the Relevant Period.

(ii) The inability to trace the goods to the purported manufacturing source or the supplier which sold the products to [K].

(iii) The inexplicable reason why Osperia products were not known or traded in the market despite the high transaction volumes involved in the present case, as well as the dubious nature of the "Osperia" website.

(iv) The lack of a business rationale behind the transactions. The Board was of the view that the commercial arrangements involved were truly bizarre and incredulous. It was a deal which was too good to be true, namely, a risk-free arrangement where the taxpayer would earn a marked-up profit as a middleman without doing any more than to serve as a mailbox for the claiming of input tax. It beggared belief why [K] did not cut out the middleman and deal directly with the overseas customers.

(d) The Board also observed that had the transactions been genuine, the taxpayer would have been able to provide further proof to close the doubts raised; but it did not do so.

(e) The Comptroller did not have to prove the existence of a missing trader fraud scheme or any other attempt to defraud the collection of public revenue to succeed in the appeal.

The taxpayer was ordered to pay legal costs to the Comptroller.

Read the judgement of the Board on Singapore Law Watch and the judgement of the High Court on Singapore Courts.

The taxpayer claimed input tax of S$102,288.20 on the purchase of Intel processors from [ZZZ] in its GST F5 return for the accounting period of 1 July 2018 to 30 September 2018 (the "Relevant Period"). Based on the Comptroller's investigations, the supply chain for the purported transactions in question was as follows:

Upstream Supplier [DDD]	Immediate Supplier [ZZZ]	The Appellant [GIG]	Hong Kong SAR Customer [TTT]
			Singaporean Customer [HHH]

The taxpayer's purported business arrangement and transactions exhibited several red flags which suggest that the taxpayer was involved in a Missing Trader Fraud arrangement. Therefore, the Comptroller withheld the taxpayer's GST input tax refunds for the Relevant Period and carried out a detailed audit and investigation. Eventually, the Comptroller denied the taxpayer's input tax claims on the basis that it is doubtful that [GIG]'s purported business of trading in the subject goods entailed genuine business transactions. The taxpayer filed an appeal to the Board to dispute the Comptroller's decision. 

The Board dismissed the taxpayer's appeal and ordered the taxpayer to pay legal costs of $64,000 to the Comptroller. The Board held that the taxpayer had failed to discharge its burden to prove that there were indeed supplies of the Intel processors made in the course or furtherance of a business carried on by the taxpayer, having regard to the following:

(a) There was little evidence (apart from bare assertions) to show that the taxpayer's transactions were genuinely made in the course or furtherance of a business. The taxpayer failed to provide any real details of its purported transactions with its alleged supplier [ZZZ] and customers [TTT] and [HHH]. 

(b) The taxpayer did not adduce documentary evidence in support of its position that it was approached by [TTT] or [HHH] and that negotiations over price occurred even though such evidence must be available to [GIG].

(c) The absence of any evidence on the taxpayer's part was troubling considering the speed at which the purported transactions took place (i.e. the five transactions over the course of 11 days, with each transaction involving back-to-back trades that were all completed from start to end on the same day).

Read the judgement of the Board on Singapore Law Watch.