A wholesale trader, Seow Ming Liang ("Seow"), is the first to be charged for giving false information in the voluntary registration for GST for his business. He was also charged for creating fictitious entries in his GST returns to make a fraudulent claim for GST refunds. Seow was sentenced to 6 weeks’ jail and ordered to pay a penalty of $298,011.84.

False declaration in voluntary registration for GST

GST registration is compulsory for businesses whose annual taxable turnover has exceeded $1 million, or is expected to exceed $1 million in the next 12 months. Businesses whose taxable turnover does not exceed $1 million may choose to register for GST on a voluntary basis.

Seow is the sole-proprietor of Geek Enterprise (formerly known as Etechz Solutions) dealing in wholesale import and export of computer component parts. In 2010, Seow applied to register his business for GST on a voluntary basis. In the GST Registration form, he made a false entry by stating that he would be making taxable supplies of $300,000 in the next 12 months, when he had no reasonable grounds for believing so given that he did not conduct any business at all.

Fraudulent claims in GST refunds and forged invoices

GST-registered businesses can offset the GST they pay on their purchases (input tax) against the GST they collect from sales (output tax), and pay the net 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 of the difference from IRAS.

In his first GST return for the accounting period from 1 to 31 Jul 2010, Seow made false entries in his GST returns, resulting in net GST refund claims of $35,670.39 which he was not entitled to. In addition, Seow had also created two fictitious purchase invoices when IRAS requested for documents to support his claim for GST refunds.

Claiming input tax on fictitious purchases is an offence. Offenders face a penalty of up to 3 times of the amount of tax undercharged and/or imprisonment up to 7 years.

Seow pleaded guilty to 3 charges with one remaining charge taken into consideration for sentencing. Seow was sentenced to 6 weeks’ imprisonment and ordered to pay a penalty of $298,011.84, which is 3 times the amount of tax undercharged.

Lower Penalties for Voluntary Disclosures

IRAS takes a serious view of GST-registered businesses that wilfully make false claims for GST refunds or under-charge GST on sales. Tax evasion is a criminal offence punishable under the law and the Court imposes severe penalties for such offences. Businesses or individuals should disclose any past tax evasion immediately. IRAS will treat such disclosure as a mitigating factor when considering the charges to proceed with.

IRAS is also aware that some businesses and individuals could be negligent or unaware of their tax obligations, resulting in mistakes. IRAS views such mistakes differently from tax evasion. In the spirit of encouraging voluntary compliance, IRAS imposes lower penalties for such mistakes disclosed voluntarily by taxpayers.

Those who wish to disclose past mistakes or evasion, or report malpractices that might indicate tax evasion should write to:

Inland Revenue Authority of Singapore
Investigation & Forensics Division
55 Newton Road, Revenue House
Singapore 307987
Email: [email protected]

IRAS would ensure that the identities of informants are kept confidential.

Inland Revenue Authority of Singapore