The Diesel Refund Scheme was introduced to provide relief from the general fuel and Road Accident Fund levies for primary sector operators, specifically those in farming, forestry, and mining.
For years, qualifying users could claim refunds on 80% of levies on eligible diesel purchases. As of 1 April 2026, this has increased to 100%.
The change is welcome news for primary operators facing elevated diesel prices and tight margins. However, the headline figure is only part of the story, as the rebate increase comes with a complete restructuring of how claims are administered, and the new system is not yet fully operational.
“A 100% refund sounds like great news, and it is, but navigating the new system requires careful preparation,” says Van Rooyen.
New legislation
“Under the amended legislation, primary sector claimants operating on land are now entitled to claim 100% of the levies on eligible diesel purchases used in qualifying farming, forestry, and mining activities,” explains Appalsamy.
“To ease the transition, SARS [the South African Revenue Service] has confirmed that the new rate will apply from the April 2026 return reflected in the VAT return submitted in May 2026. SARS has also updated its external policy document, Manage Diesel Refund Calculation, to align with the amended legislation.”
Out with the vat link, in with a standalone system
Under the old system, diesel refund claims were processed through VAT returns. Registered vendors could offset claims against VAT liabilities via the VAT201 return, which meant diesel refunds were effectively handled as part of VAT administration rather than a separate compliance process.
That is changing decisively. “SARS is decoupling diesel refunds from VAT and moving to a dedicated, standalone digital platform, the Modernised Diesel Refunds System, with its own registration requirements, reporting processes, and audit mechanisms. The diesel rebate is, in effect, becoming its own compliance regime,” says Van Rooyen.
“Many claimants would attest to the administrative nightmares of the old system. Claims provisionally paid to users were sometimes reversed, resulting in underpayment of VAT and unnecessary penalties. Any attempt to waive these penalties has not been an easy exercise for most claimants.”
The stated aim of the new system is greater traceability and tighter enforcement. Claims will need to demonstrate a clear and documented chain: diesel purchase, storage, and use in a qualifying primary production activity.
The real picture: the system is not ready yet
Although the policy has been in effect since 1 April 2026, SARS has confirmed that the new platform is still being assessed and refined. Full implementation will be phased in, and transitional arrangements are currently in place.
This means a gap between policy and system readiness, so while the rules have changed, the infrastructure to support it is not yet fully functional.
Claimants can expect some uncertainty around registration timelines, how and when claims can be submitted, and how quickly refunds will be processed. The message from advisers across the agriculture sector is consistent: do not let this uncertainty become an excuse for inaction.
“The time to prepare is now, not once the system is fully live. Farmers and other primary producers who move early, before the system goes fully live, will be far better placed than those who wait,” says Appalsamy.
Registration: key requirements
Under the old VAT-linked system, VAT registration effectively gave access to the diesel rebate, but that is no longer the case. All claimants, including current users, must now register separately for the Diesel Refund System on SARS eFiling by completing the RAV01 form and selecting ‘Diesel Refunds’.
Registration requirements are:
- Declaration of farming, forestry, or mining activities, including land and operations;
- Details of diesel storage facilities and the equipment or machinery in use;
- Disclosure of diesel refund relationships; and
- Diesel sellers must also register on the Diesel Refund System.
Failure to register precludes a taxpayer from claiming the refund.
The contractor question: wet vs dry matters
One of the misunderstood aspects of the diesel rebate, and one that SARS is scrutinising more closely under the new regime, is how contractor arrangements affect eligibility.
A ‘wet contractor’ arrives with their own machinery and fuel, and because they own the diesel, the farmer has no claim to the rebate on that fuel.
A ‘dry contractor’ arrangement works differently: the farmer supplies the diesel, while the contractor supplies labour and machinery. In this case, the farmer may claim the rebate on the diesel, provided all other requirements are met.
“Under the new system’s tighter verification mechanisms, incorrect treatment of contractor arrangements is expected to be one of the primary reasons for rejected claims and increased audit exposure,” explains Appalsamy.
“Farmers should review all contracting arrangements now, structure them clearly, and ensure the documentation reflects who is supplying the fuel.”
VAT threshold changes: a strategic decision
The change to the VAT registration threshold, also effective from April 2026, adds a new dimension. Compulsory VAT registration now applies only to operations with a turnover of more than R2,3 million, while voluntary registration remains available from R120 000 upwards.
For operations in the R120 000 to R2,3 million bracket, this requires a genuine strategic decision. Under the old system, VAT registration was the gateway to the diesel rebate. Now, the expanded turnover tax system offers a simpler alternative, but it does not accommodate diesel refund claims.
“For high diesel-use operations, the rebate may well justify the added complexity of staying in the VAT system. For smaller or lower-intensity ones, the turnover tax route may offer a cleaner compliance path, even if it means forgoing the rebate,” says Van Rooyen.
“This decision is worth working through carefully with a tax practitioner or agricultural accountant.”
Record-keeping for refunds: the new non-negotiable
The new system will demand strict record-keeping from all claimants. Key requirements include:
- Monthly storage and usage logbooks (claimants’ own simplified logbooks are permitted);
- Detailed diesel purchase records and supporting documentation; and
- Logbooks must be retained for five years from the date of use or disposal of the diesel or the refund return (whichever occurs second).
Prescribed minimum logbook record requirements are available on the SARS website. Advisory firms warn that poor record-keeping will be the single biggest cause of rejected claims once the system is fully operational.
“SARS has always insisted that diesel refunds are not an entitlement but a privilege requiring strict compliance, and the courts have held the same. While SARS may intend to simplify processes, strict compliance with the Diesel Refund Scheme remains a requirement. Claimants must keep a full audit trail to avoid claims being rejected,” adds Van Rooyen.
Next steps
In summary, claimants who prepare well may see a material reduction in input costs under the 100% rebate, while those who do not face increased compliance risk under the new system.
Claimants’ immediate priorities should be:
- Registering on SARS eFiling for the standalone Diesel Refund System (RAV01 form);
- Reviewing and correctly structuring all contractor arrangements;
- Building record-keeping systems to support future claims; and
- Consulting an accountant or tax adviser, especially if the VAT threshold change affects their registration status.
“The transition period will not be without headaches, but those who engage early will be far better placed. Always consult a qualified tax practitioner or agricultural adviser for guidance specific to your operation,” concludes Appalsamy.
Disclaimer: This article is intended for general informational purposes only and does not constitute legal or tax advice. Readers should consult a qualified tax practitioner or legal adviser for guidance specific to their circumstances.
