You buy goods for S$100,000 plus 9% GST and pay the supplier S$109,000. You claim S$9,000 of input tax. Months later IRAS asks about your supplier. The supplier collected GST from you and never paid the tax over. Now your claim is at risk, and you did nothing wrong on paper.
How the fraud works
A business in a chain of buyers and sellers charges GST to the next buyer, keeps the money and disappears. Buyers further along still claim input tax on their purchases. The final sale, often an export, carries no GST. IRAS loses revenue at the missing link. This is missing trader fraud.
The rule since 1 January 2021
– IRAS denies your input tax if you knew or should have known the purchase was part of an arrangement to cause a loss of GST revenue.
– IRAS adds a 10% surcharge when you should have known.
– IRAS prosecutes when you knew.
A small company feels the risk most, because one denied claim is a large share of the quarter’s cash. In the example above, you lose the S$9,000 you already paid to the supplier. A 10% surcharge comes on top.
What IRAS expects from you
The IRAS guide on due diligence (4th edition, 30 January 2026) expects you to document your checks on four things: the counterparty, the pricing, the payments and the goods. If IRAS audits you, a file with dated evidence is your best defence. A memory of a phone call is not.
Checks on a new supplier or customer
– Counterparty. Confirm the company exists, check its GST registration number is valid with IRAS, and find out who owns the company and how the business found you. Meet or call the people who run the business.
– Pricing. Compare the price with the market. A price far below the market, or a guaranteed profit with no risk, is a warning sign.
– Payments. Pay by bank transfer into an account in the supplier’s own registered name. Refuse cash, and refuse requests to pay a third party.
– Goods. See the goods or the delivery documents. Match the quantity and description on the invoice to what moved.
Keep one folder per new counterparty with the date, the checks you ran and the evidence.
Protect your own name
Fraudsters also use real companies. Do not lend your GST number, your company name or your system logins to anyone. Do not agree to deals where someone else handles the paperwork and you collect a fee. A deal like this makes your company the visible link in the chain.
Customer accounting for mobile phones, memory cards and boxed software above S$10,000 moves the GST declaration to the buyer. This closes one gap, but covers only those goods. My article on customer accounting explains the rule.
If a supplier or customer already worries you, stop trading with them and ask before the next return goes in. Send your latest profit figure or your question by WhatsApp to +65 9876 3553 or by email to henry@cschow.com.sg.
Henry Chow
Public Accountant, C S Chow & Co