With the current fuel crisis, financial pressure on businesses has intensified, making relief measures such as diesel rebates increasingly important.
The government implemented the distillate fuel refund system (diesel refund scheme) in an attempt to support primary production in the primary activities of agriculture, mining, forestry and fishing. The diesel refund did not extend to secondary activities such as the processing of goods and manufacturing, however in 2023 the dispensation was extended to foodstuff manufacturers as a relief measure to address the load-shedding crisis in South Africa. This was for a limited period of two years (1 April 2023 to 31 March 2025).
In order to claim a refund through the diesel refund scheme, the claimant should be registered as a vendor for VAT purposes and registered as a “user” for Customs and Excise purposes.
Schedule No 6, Part 3, Note 6 of the Customs and Excise Act (Schedule 6) prescribes the requirements of the diesel refund system. Schedule 6 provides that the purchase of the diesel must be an “eligible purchase”. The term “eligible purchase” is defined as the purchase of distillate fuel “by the user for use and used as fuel as contemplated in paragraph (b)”.
Users are entitled to claim a certain percentage of eligible purchases depending on the sectors they are in. For example, on land users in the Farming, Forestry, and Mining sectors could claim a refund on 80% of eligible purchases, however in an effort to align the policy intent which is to provide cost relief, this has been increased to 100% of eligible purchases with effect from 1 April 2026.
Schedule 6 also provides a list of the qualifying activities for each industry.
On 18 March 2022 the Minister of Finance published amendments under Government Gazette No. 45056 (R.1893) and No (R.1892) (“2022 Amendments”). Below are some of the new amendments;
- the user has to create a diesel refund user registration profile electronically and provide the following information:
- category of qualifying activities performed;
- the location where the qualifying activities are performed;
- storage facilities for eligible purchases;
- assets that are powered by eligible purchases of the diesel refund user, with the identifying features, make, model and fuel tank capacity thereof, as well as the physical address of any such asset which is situated at a fixed geographical location.
Previously, in order to claim a refund through the diesel refund scheme, the person should have been registered as a “user” for Customs and Excise purposes and registered as a vendor for VAT purposes as the refund claims are administered through the VAT system.
- the inclusion of “wet contractors” in the definition of a “user”.
- equipment and vehicles regarded as dedicated for the performance of predominantly qualifying activities no longer require a detailed usage logbook; the user is only required to substantiate the receipt of the diesel and the dispensing thereof.
- To the extent that the user performs more than one category of primary activities or any non-qualifying activities, the user must keep a detailed logbook demonstrating how the diesel was obtained, purchased, collected, delivered, stored, dispensed for use, used, disposed of or lost in respect of qualifying activities or non-qualifying activities.
To align with the 2022 Amendments, in November 2025, the South African Revenue Services (SARS) held workshops to discuss these amendments.
In December 2025 SARS made a formal announcement that claims will no longer be administered through the VAT system but on a standalone system (New Diesel Refund System) and that from April 2026 registration on the system will be open. However, in March 2026, it announced that the New Diesel Refund System will open later than initially communicated as additional time is required to pilot and test the system.
It is important to note that even though the 2022 Amendments were published in March 2022 the effective date has still not been provided and currently cannot yet be applied. SARS has held a workshop for stakeholders discussing the amendments however it is uncertain when the effective date will ultimately be given.
Unfortunately, until the effective date has been given, users are required to still adhere to the onerous requirements.
The diesel refund scheme is based on the principle of self-assessment and, therefore, places the burden on the user to provide proof of entitlement. The user should consequently provide proof that the diesel was purchased, stored and used for the qualifying activity it engages in. Therefore, the user has to be in possession of all the necessary documentation prescribed in the Customs and Excise Act, such as logbooks, invoices etc. to fully discharge this onus.
We caution that it is extremely important for all diesel refund users, to familiarize themselves with the requirements of the current as well as the new diesel refund scheme legislation and system changes in order to fully benefit from it and to ensure full compliance. The Customs and Excise Act contains harsh penal provisions, therefore it is important for users to be compliant at all times.
Written by Kagiso Nonyana, Senior Manager in BDO South Africa’s Indirect Tax practice