In FY2024/25, the Inland Revenue Authority of Singapore (IRAS) completed over 2,800 GST audits and recovered approximately S$205 million in tax and penalties. That figure — larger than many small Singapore companies’ annual revenues — should make every business owner stop and ask: could my business be next?

The short answer is that IRAS does not audit randomly. It runs a sophisticated risk-scoring system that flags businesses based on filing patterns, industry benchmarks, and specific behavioural indicators. Understanding what triggers these flags is not just good governance — it can save your business from a compliance nightmare that disrupts operations, damages your reputation, and results in penalties of up to twice the undercharged tax amount.

This guide explains IRAS’s current GST audit focus areas, the most common red flags, and what your business should do before an auditor comes knocking. It is intended for owners and directors of Singapore SMEs who are already registered for GST and want to protect their compliance position.

IRAS’s Four Priority GST Audit Areas for 2026

IRAS publishes its current audit focus areas on its website, and in 2026 these four categories are receiving the most enforcement attention.

1. Missing Trader Fraud (MTF) Arrangements

Missing trader fraud is a scheme where fraudsters exploit the GST refund system by importing goods, charging GST on sales, collecting the tax from buyers, and then disappearing (“missing”) without remitting the GST to IRAS. Businesses that unknowingly participate in these supply chains — because they purchased goods from a fraudulent vendor — can find themselves caught in an audit even if they acted in good faith.

IRAS targets not just the fraudsters but also businesses that failed to conduct proper due diligence on their suppliers. If your business regularly trades in high-value portable goods (electronics, precious metals, mobile devices), you are in a higher-risk category. IRAS expects you to maintain records verifying the commercial substance of your transactions.

2. Businesses Making Low-Value or Persistent GST Refund Claims

A GST-registered business that is consistently in a refund position — claiming more input tax than it collects in output tax — attracts scrutiny. While this is legitimate for export-heavy businesses that zero-rate most of their sales, it is a major red flag for businesses without a clear export-driven model.

If your business has claimed GST refunds for multiple consecutive quarters without an obvious export rationale, IRAS will want to verify that your input tax claims are valid, your supplies are properly classified, and you are not inflating purchase invoices to generate artificial refund positions.

3. Sale of Non-Residential Property

The sale of non-residential property is a common source of output tax errors. Unlike residential property (which is exempt from GST), commercial and industrial properties are standard-rated at 9%. Sellers who fail to charge GST on such transactions — or who attempt to characterise the sale in a way that avoids GST — face severe consequences.

IRAS cross-references property transaction data from the Urban Redevelopment Authority (URA) and the Singapore Land Authority (SLA) against GST returns, making it straightforward for auditors to identify unreported taxable property sales.

4. Under-Declaration of Supplies by Sole Proprietors

Sole proprietors who run businesses registered for GST are under heightened scrutiny for under-declaring their taxable supplies. Common patterns include cash-in-hand transactions that do not appear in GST returns, invoices raised personally rather than through the business, and revenue split artificially across multiple entities to stay below the GST registration threshold of S$1 million.

The Red Flags That Trigger an IRAS GST Audit

Beyond the four priority areas, IRAS’s automated risk engine monitors for a wide range of behavioural and filing anomalies. Here are the most common red flags for Singapore SMEs.

Claiming Input Tax Without Making Taxable Supplies

If your business is GST-registered but is dormant, or has significantly reduced its taxable activities, yet continues to claim input tax on purchases, IRAS will flag the discrepancy. A dormant company that claims input tax — particularly for services like rent, professional fees, or IT — without generating corresponding output tax is a classic audit trigger.

Claiming Input Tax on Disallowed Items

Section 26 of the GST Act expressly blocks input tax recovery on certain categories. These include motor cars (unless you are in the business of selling or hiring out cars), medical expenses for employees, club subscription fees, family benefits, and expenses that relate to private or domestic use. Despite this being well-established law, input tax claims on motor car expenses and medical costs remain among the most common errors IRAS finds on audit.

Zero-Rated Exports Without Proper Documentation

A zero-rating (0% GST) is only valid for exports if you maintain the required export documentation — including customs export permits, airway bills or bills of lading, packing lists, and commercial invoices. IRAS regularly disallows zero-rating for businesses that cannot produce contemporaneous documentation evidencing that the goods genuinely left Singapore.

Businesses that process export transactions manually, or that operate from home, are especially vulnerable. The fact that you operate on a small scale does not exempt you from the documentation requirement.

Sharp Revenue Declines Inconsistent with Corporate Tax Filings

IRAS cross-matches GST returns against corporate income tax returns filed with IRAS. If your GST returns show a sharp revenue decline that does not match your corporate tax filing, or if your income tax return reports revenue far above what your GST returns suggest, the discrepancy will be flagged.

Revenue Splitting Across Related Entities

Structuring a business across multiple entities — where each entity stays just below the S$1 million taxable turnover threshold to avoid GST registration — is a known anti-avoidance strategy that IRAS actively investigates. Under Section 33 of the GST Act, IRAS has the power to disregard artificial arrangements and treat the entities as a single taxable person for GST purposes.

Sectors Under Heightened Scrutiny

Certain industries have historically higher non-compliance rates: construction, electronics trading, food and beverage, hospitality, and businesses with complex intra-group supply chains. If you operate in these sectors, maintaining clean and contemporaneous GST records is especially important for your overall compliance calendar.

Penalties for GST Non-Compliance in Singapore

The consequences of a GST audit that uncovers under-declaration or errors are significant. Under the GST Act:

  • For errors made carelessly (without fraudulent intent): a penalty of up to twice the amount of under-declared tax, plus interest at 5% per annum.
  • For deliberate under-declaration: a penalty of up to three times the tax amount, criminal prosecution, fines, and imprisonment of up to 7 years.
  • For late filing or failure to register: fixed penalties plus additional compounding of unpaid tax.

The same principle of escalating penalties for late filing applies across IRAS’s tax administration. IRAS operates a Voluntary Disclosure Programme (VDP) that significantly reduces penalties for businesses that come forward before an audit is initiated.

How to Conduct a GST Self-Audit Before IRAS Does It For You

The most effective defence against a GST audit is conducting your own periodic review. Here is a practical checklist.

Review Your Output Tax

  • Are you charging GST on all taxable supplies, including supplies to related parties?
  • Are non-residential property transactions properly classified and output tax accounted for?
  • Are there cash sales or barter arrangements not captured in your GST returns?
  • Are your zero-rating positions supported by contemporaneous export documentation?

Review Your Input Tax Claims

  • Is every input tax claim supported by a valid tax invoice?
  • Have you excluded disallowed items — motor cars, medical expenses, club fees, private expenses?
  • For businesses with both taxable and exempt supplies, is your apportionment methodology defensible?

Check Your InvoiceNow Compliance (2026 Requirement)

From 1 April 2026, new voluntary GST registrants must transmit invoice data through the InvoiceNow network. The requirement will progressively extend to all GST-registered businesses by April 2031. Businesses that are not yet compliant should review the IRAS guidelines on GST audits and plan their transition accordingly.

What Happens During a GST Audit?

If IRAS selects your business for a GST audit, you will typically receive a written notification requesting documents — GST returns, tax invoices, accounting records, bank statements, contracts, and export documents. Most desk audits are resolved within three to six months. If IRAS identifies errors, it will issue an assessment for the additional tax due, along with penalties and interest. You have 30 days to object to any assessment you disagree with.

Having well-organised, contemporaneous records dramatically reduces both the duration and the adverse outcome of any IRAS audit. Businesses that maintain digital records and reconcile accounts monthly are in a much stronger position than those that scramble to reconstruct records when notified.

For the latest Singapore business news and regulatory updates, there are useful resources for directors and business owners looking to stay current with IRAS enforcement trends. Beyond tax compliance, sound financial management and investment decisions are equally important for business owners building long-term value.

If you are concerned about your GST compliance position, it is always better to act before IRAS does. If you need legal advice on your tax compliance obligations, we can point you in the right direction.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services