Diesel Rebates for Farming: Eligibility and Record-Keeping

The Diesel Refund Scheme offers significant benefits to farming enterprises, allowing them to claim rebates on diesel used for primary production activities. This scheme is crucial for alleviating costs associated with fuel, which is often a substantial expense in agricultural operations.

Refunds under the Diesel Refund Scheme are merely processed by utilising the vat administrative system and the concession is granted to certain qualifying purchases in terms of the Customs and Excise Act. The diesel refunds are therefore offset against any VAT which may be payable for the tax period concerned, or alternatively, will increase any VAT refund if the input tax for the period exceeds the output tax liability.

Qualifying entities that carries on eligible activities and that are registered for VAT purposes (under the Value-Added Tax Act, No. 89 of 1991), may apply for registration for the diesel refund by completing a VAT101D (Application for registration of diesel refund).

Qualifying Activities and Eligibility

Farming activities, as defined under the Customs and Excise Act, qualify for rebates under the Diesel Refund Scheme. These activities encompass a broad range of operations essential to agricultural production, including but not limited to:

• Growing and harvesting crops

• Breeding and caring for animals

• Forestry and horticulture

• Earthworks, irrigation, and water management

• Maintenance of farming infrastructure

The rebate applies to diesel purchased specifically for these activities, enabling farmers to recover a portion of the fuel levy and Road Accident Fund levy paid on eligible purchases.

Calculation and Mode of Refund

The refund calculation is based on the quantity of eligible diesel purchased. Typically, it covers 80% of eligible diesel purchases, subject to specific levy rates.

Farming, forestry or mining on land is 148,0 cents per litre fuel levy on 80 per cent of eligible purchases, plus 218,0 cents per litre Road Accident Fund levy on 80 per cent of eligible purchases equalling 366,0 cents per litre on 80 per cent of the total eligible purchases.

Mode of calculation of refund is as follows:

For 1 000 litres eligible purchases -

1 000 x 80 per cent equals 800 litres on which a refund of 366,0 cent per litre may be claimed;

(bb) For 1 000 litres purchased of which 300 litres represent non-eligible purchases, for example, carriage of goods for reward - 1 000 litres less 300 litres equals 700 litres eligible purchases x 80 per cent equals 560 litres on which a refund of 366,0 cents per litre may be claimed

Record-Keeping Requirements

Central to claiming these rebates is meticulous record-keeping. Farmers must maintain comprehensive documentation to substantiate their refund claims. The key records that must be kept include: Purchase Invoices: All invoices related to diesel purchases must be retained for a minimum of 5 years from the date of use or disposal.

Logbooks: These are critical and must be systematically maintained.

Logbooks should detail:

• Opening and closing date.

• Monthly opening litres of diesel in equipment.

• Litres received from storage (Date, storage detail and quantity).

• Equipment detail (Type, identification number, opening km/hours, closing km/hours, and total km/hours).

• Monthly closing litres of diesel in equipment.

• Purpose/Activity performed – Date, place, specific eligible activity performed, eligible litres, non-eligible activity performed, and non-eligible litres

• Operator’s particulars

Logbook entries must be supported by source documentation such as manufacturer specifications, operational details (like distance traveled or hours operated), and any incidents relevant to diesel usage.

Separation of Records: If a farmer engages in multiple activities (e.g., farming and transportation), records must distinguish between eligible and non-eligible uses of diesel.

Compliance and Inspection

It's imperative that farmers adhere strictly to these record-keeping requirements. Failure to maintain accurate records may result in reduced rebate claims or other penalties. Authorities have the right to inspect these records at any time to ensure compliance with scheme regulations.

Conclusion

The Diesel Refund Scheme represents a significant financial benefit for farmers in South Africa, offsetting operational costs associated with diesel fuel. By maintaining meticulous records and adhering to scheme guidelines, farmers can maximize their rebate claims while ensuring compliance with regulatory standards. This support is vital in sustaining and enhancing agricultural productivity across the country. For more detailed guidance and specific requirements, farmers are encouraged to consult with tax advisors or refer directly to the Customs and Excise Act provisions governing the Diesel Refund Scheme. Let us at Tax A Sured Pty Ltd assist you to be proactive ensure that you fully capitalize on the opportunities provided by this beneficial program.