Diesel refunds in South Africa: Fueling your cash flows.

In South Africa, the South African Revenue Service (“SARS”) allows for the recovery of Value Added Tax (“VAT”) on diesel purchases for businesses involved in primary production.  This scheme, rooted in tax legislation, serves as a crucial lifeline for various industries, offering refunds on diesel tax to eligible entities. Understanding the intricacies of this Scheme is vital for businesses to maximise their benefits and ensure compliance with regulatory requirements.

Legislative framework

The Scheme operates within the framework of the Customs and Excise Act, which outlines the conditions and procedures for claiming refunds on eligible diesel purchased.  This legislation sets the parameters for eligibility, administration, and enforcement of the scheme.

Funding sources

The funding for the Scheme is derived from the VAT on fuel levies and Road Accident Fund (“RAF”) levies collected.  A portion of the funds collected is allocated towards refunding eligible diesel purchases, thereby incentivising economic activities that rely on diesel usage.

At the time of the publication of this article, refunds on eligible diesel purchases amount to 148 cents per litre on fuel levies and 218 cents per litre on RAF levies. 

Administration of the Scheme

SARS is responsible for the administration of the Scheme via its eFiling portal. SARS oversees the processing of claims, verification of eligibility criteria, and disbursement of refunds to qualifying businesses. 

Any claims under the Scheme will fall under the VAT department at SARS.  As a result, any entity wishing to claim from the Scheme must be VAT registered with SARS.

Eligibility criteria

To claim refunds under the Diesel Refunds Scheme, businesses must meet certain criteria and fulfil specific requirements:

1. Eligible activities

   The Scheme primarily benefits businesses engaged in primary activities such as agriculture, mining, forestry, and certain industrial processes that necessitate the use of diesel fuel.

2. Registration

   Entities must be VAT registered with SARS to participate in the scheme.

3. Documentation

   Claimants are required to maintain detailed records of diesel purchases, usage, and relevant business activities to support their refund claims. 

   SARS has been conducting detailed audits on the required documentation.  Failure to maintain accurate records has resulted in the rejections of claims and subsequent interest and penalties being levied against the claimant.

4. Compliance

   Businesses must comply with all regulatory and reporting obligations prescribed by SARS to remain eligible for refunds.

Timeframe for claims

The Scheme allows businesses to submit claims along with their normal VAT201 submissions.  Eligible diesel purchases are entitled to be claimed for a period of up to two years from the date of the purchase of the diesel. 

Claim submission process

Claims for diesel refunds must be logged with SARS through the designated channels.  It is essential for businesses to accurately complete claim forms and provide all requisite supporting documentation to facilitate timely processing.

Conclusion

The Scheme administered by SARS serves as a vital mechanism for supporting businesses reliant on diesel fuel in South Africa.  By understanding the legislative framework, eligibility criteria, and procedural requirements, businesses can leverage this Scheme to alleviate operational costs and enhance their cash flows.

Author

Marco Matteucci

Owner MattStrat Business Consulting