Diesel refunds for primary production

What’s New?

• 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.

  For more information, see the letter to stakeholders.

How do I access the Diesel Refund Scheme?

The diesel refund system allows for a refund of all or part of the fuel levies and RAF (Road Accident Fund) to producers in certain sectors. The Customs and Excise Act No. 91 of 1964 (The Act) and Schedule No. 6 (Note 6 in Part 3) govern the diesel refund scheme. The administration of the scheme is through the VAT (Value Added Tax) system, which requires an entity or 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. The entity or person performing qualifying activities may register for the Diesel Refund Scheme by completing and submitting a VAT 101D form. 

Note that the registration still depends 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.

Any diesel refund claim of fuel levy and RAF levy must be submitted within two years from the date of purchase of the diesel.

All relevant documentation relating to diesel purchases as well as the various logbook entries or other records which indicate the actual amounts of diesel purchased and used for eligible and non-eligible use during the tax period, must be retained for a period of 5 years from the date of use or disposal of the distillate fuel or the refund return, whichever occurs last.

Any diesel refund amount which is found to have been incorrectly refunded will have to be paid back to SARS (South African Revenue Service), together with any penalties and interest that are applicable.