18 May 2023 – Clarity on the extension of the Diesel Refund to manufacturers of foodstuffs
In the 2023 budget speech, the Minister of Finance announced the following tax relief measures in an effort to address the current load-shedding problem the country is facing:
“Government implemented the diesel refund system in 2000, to provide full or partial relief for the general fuel levy and the RAF levy to primary sectors. The refund system is in place for the farming, forestry, fishing, and mining sectors. In light of the current electricity crisis, a similar refund on the RAF levy for diesel used in the manufacturing process (such as for generators) will be extended to the manufacturers of foodstuffs. This will take effect from 1 April 2023, with refund payments taking place once the system is developed and will be in place for two years until 31 March 2025. This relief is implemented to limit the impact of power cuts on food prices.”
SARS will administer the new refund to the extent of 80% of the RAF levy for diesel purchased for use and used in the manufacturing of foodstuffs through the DA66 Excise Refund System. The currently manual DA66 process will be automated in the last quarter of 2023 and is separate from the diesel refund system that is administered through the VAT system by way of submitting VAT 201 returns.
How do I access the Diesel Refund Scheme?
The diesel refund is governed by the Customs and Excise Act, but is administered through the VAT system, which requires a person to be registered for VAT.
Qualifying entities that carry on eligible activities and that are registered for VAT purposes, may apply for registration for the diesel refund. Farming is a qualifying activity under the Diesel Refund Scheme and most farming enterprises will qualify to register for the Diesel Refund Scheme. The person carrying on a farming enterprise must apply for registration for the Diesel Refund Scheme.
If the person is already registered for VAT as a vendor that carries on a farming enterprise, then registration for the Diesel Refund Scheme can be made by completing and submitting a VAT 101D form.
If the person carrying on a farming enterprise is not registered as a VAT vendor, then application for VAT registration and application for registration for the Diesel Refund Scheme must be made simultaneously. Note that these registrations still depend on whether the other remaining requirements for VAT registration and the Diesel Refund Scheme are complied with.
How do I claim for a diesel refund?
The diesel refunds under the Diesel Refund Scheme is processed using the VAT system.
The claim for a diesel refund will be made using the VAT 201 return. A diesel refund claim will be offset against any VAT liability that is payable for the tax period concerned, or alternatively, the diesel refund claim will increase any VAT refund that is due to the vendor.
All relevant documentation relating to diesel purchases as well as the various logbook entries or other records which indicate the actual amounts of diesel drawn from stock for eligible and non-eligible use during the tax period must be retained for a period of 2 years.
Any diesel refund amount which is found to have been incorrectly refunded will have to be paid back to SARS, together with any penalties and interest that are applicable.
LAPD-VAT-G13 – Pocket Guide on the VAT rate increase on 1 April 2018
LAPD-VAT-G14 – VAT FAQs Increase in the VAT Rate from 1 April 2018
LAPD-VAT-G16 – VAT FAQs Supplies of electronic services
VAT-REG-02-G01 – Guide for Completion of VAT Application – External Guide
VAT101 – Value Added Tax Registration Application – External form
VAT101D – Application for Registration of Diesel Refund – External Form
VAT102 – Application for separate registration VAT – External form