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CRIMINAL SYNDICATE MEMBER JAILED FOR EXPLOITING GST SYSTEM FOR CRIMINAL PROFITS

On 4 August 2021, The Police charged six individuals from a criminal syndicate for their alleged involvement in a Goods and Services Tax (“GST”) Missing Trader Fraud (“MTF”) scheme.

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Lee Chong Hoong (“Lee”), a director of a Singapore-incorporated company, Nagore Trading Pte Ltd (“Nagore”), is the first member of the criminal syndicate to have pleaded guilty. He was sentenced to three years’ imprisonment on 6 October 2022.

Perpetrators of MTF schemes seek to exploit the GST system in order to generate criminal profits through a series of sham transactions. These sham transactions ultimately form the basis of fraudulent GST refund claims made to IRAS, or are used to defraud innocent parties into participating in the sham transactions, by deceiving them that they would be eligible to make such GST refund claims.

In this case, a Singapore-incorporated GST-registered company, Nagore, was involved in a GST MTF scheme. Nagore was a shell company with no real business operations. Its role in the GST MTF scheme was to generate false invoices to support the sham transactions in the scheme.

Between 4 February 2015 and 28 January 2016, Nagore forged at least 183 sales invoices for purported sales amounting to approximately S$56 million. These forged sales invoices, together with other documents, were used to support Nagore’s declarations of about S$114 million in fictitious sales in its GST filings. They also formed the basis for the submission of fraudulent input tax claims by other entities amounting to approximately S$8 million.

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In particular, between September 2015 and January 2016, Lee and three other co-accused persons used Nagore to perpetrate the GST MTF scheme. He was personally involved in the forging of 28 sales invoices of Nagore for purported sales exceeding S$11 million to other shell companies.

After operating for close to a year, Nagore ceased its operations sometime around 28 January 2016.  Thereafter, between February 2016 and March 2016, Lee was further involved in the forgery of at least 409 sales invoices when Nagore was subsequently being audited.

Lee pleaded guilty to and was convicted of one count of fraudulent trading under Section 340(5) of the Companies Act for being a knowing party to Nagore commencing business for a fraudulent purpose. Two other charges for conspiracy to commit forgery under Section 465 read with Section 109 of the Penal Code amalgamated under Section 124(4) of the Criminal Procedure Code were taken into consideration by the Court for the purposes of sentencing. Court proceedings for other individuals involved in the fraudulent scheme are ongoing.

The Police and IRAS take a serious view of GST MTF offences, and will not hesitate to take stern enforcement action against perpetrators of such arrangements. Offenders will be dealt with severely in accordance with the law.

In addition, from 1 January 2021, any GST-registered business that claims input tax on any supply made to them which it knew or should have known to be part of a Missing Trader Fraud arrangement, will be denied input tax and be subject to a 10% surcharge on the input tax denied. Businesses are therefore strongly advised to perform due diligence checks and take appropriate actions to address the risks identified to avoid participating in transactions suspected to be part of a Missing Trader Fraud arrangement. For more information, please refer to the e-Tax Guide “GST: Guide on Due Diligence Checks to Avoid Being Involved in Missing Trader Fraud”.

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PUBLIC AFFAIRS DEPARTMENT
SINGAPORE POLICE FORCE
06 October 2022 @ 3:15 PM

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