Diesel levy refund announced in February not up and running yet

The proposed diesel refund scheme extended to the manufacturers of foodstuffs is still not up and running. The final amendments to the Customs and Excise Act, which will enable these manufacturers to claim refunds, were only published in the middle of July.

The relief scheme was announced in the February budget and will allow manufacturers to claim a refund on the Road Accident Fund (RAF) levy paid on diesel used in stationary or fixed generators to power specific equipment necessary to produce foodstuff.

It is a temporary measure to soften the financial impact of frequent and extended bouts of load shedding on foodstuff manufacturers who have to rely on generators to keep their businesses going.

Fuel prices have been on the rise and the increased use of diesel to keep the food cupboards full has resulted in higher food inflation.

The refund will apply to 80% of the current Road Accident Fund Levy.

The benefit of the scheme amounts to R1.70 per litre of diesel used.

According to PwC some manufacturers may claim as much as R20 million to R60 million per year.

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Refund scheme: The (not so easy) process

The period in which the refund scheme applies, runs from April (retrospectively) this year until the end of March 2025.

The South African Revenue Service (Sars) says given the timing of the publication of the amendments it does not have any quantifiable data to speak of.

“It is a bit premature to provide figures pertaining to registration and acceptance at this stage, but we hope to do so soon,” says Sars spokesperson Siphithi Sibeko.

Matthew Besanko, tax and legal operations leader for the PwC South Market Area, says it is highly unlikely that companies who wish to participate in this scheme will have the necessary systems in place.

This includes relevant supporting documentation and information, such as logbooks, to account for the refund claimed.

Besanko adds that one must first register with Sars as a user before an application for a refund can be submitted, but the system is not yet ready to accept applications for these registrations.

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More certainty about refund requirements

Although publication of the final provisions was delayed, they give taxpayers “much sought-after certainty” with regards to the requirements to qualify for the refund.

Comments on the second version of the draft provisions were due on 19 April, but this was extended to 3 May, hence the delay in getting to the final version.

“The applicant is required to register with Sars a rate of yield relating to the diesel the applicant anticipates using in the production of the specifically defined foodstuff,” it states.

Further, although the refund scheme will run over a period of two years, a user will be require to maintain documents for a period of at least five years.

Sars urges manufacturers to register and to familiarise themselves with the relevant legislation and their obligations thereunder.

“This will minimise the number of claims that are rejected and will assist Sars in auditing the claims,” says Sibeko.

Besanko adds that all rebate and refund users are required by the Customs and Excise Act to register the manufacturing premises with Sars.

“This is for monitoring purposes as the premises effectively become a customs controlled area, which Sars may enter at any time for an inspection.”

ALSO READ: Household food basket prices increase again

Increased costs

Restaurant franchisor Famous Brands noted in its July update to shareholders that diesel costs for non-fleet usage were up 880% to almost R9 million for the first quarter.

It also noted that some plants run on generators for more than 40 hours per week when Eskom implements Stage 6 load shedding.

This has exposed the group’s restaurants to revenue losses, increased risk of food wastage and the increased risk of operating and capital costs.

Audit trail

The manufacturer will have to keep logbooks which must provide a full audit trail of the fuel for which the refund is claimed.

There are two types:

• Storage logbooks, which must reflect details of the receipt, storage, removal, disposal or loss of fuel; and
• Usage logbooks, which must reflect the details of the source and usage of the fuel for the manufacturing of foodstuffs.

Each application to become a “refund user” must include a detailed floor plan of the buildings on the premises indicating their use and purpose.

Sibeko says further communication with stakeholders will follow “in due course”.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.