A taxpayer is a VAT vendor conducting farming operations. Kindly provide assistance with certain aspects of the diesel rebate requirements as follows: 1. Is petrol part of the diesel rebate? 2. Can a rebate in respect of diesel that is used for the transport of the products (e.g. mealies and soya) from the farm to the taxpayer (e.g. an agricultural cooperation ) be claimed ? 3. Must there be a logbook for each implement and vehicle used on the farm? 4. Must kilometres be noted on the logbooks? Not all implements and tractors have odometer readings.
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Do petrol purchases qualify for the diesel rebate scheme? The diesel rebate applies to purchases of distillate fuel by a user (the farmer) for use and actually used in a qualifying activity (Note 5(a)(iii) to Part 3 of Schedule 6 to the Customs and Excise Act). “Distillate fuel” is defined in Note 5(a)(i) to Part 3 of Schedule 6 to the Customs and Excise Act as distillate fuel and biodiesel as contemplated in section 37B(2)(a)(i) of the Customs and Excise Act. The term “distillate fuel” means any oil used as fuel. It therefore includes diesel (which is an oil) but excludes fuel, which is not an oil. In summary, the diesel rebate does not apply to fuel. Transport of farming produce to markets Note 6(h)(iv)((aa)(A) to Part 3 of Schedule 6 to the Customs and Excise Act defines as an eligible activity “used … where such farming products are transported from the farming property to the market or first point of delivery.”
In summary, diesel used to deliver farming produce to an agricultural cooperative would qualify as eligible purchases. This does not apply to the diesel used to return the delivery vehicles to the farm. Logbook requirements: Records per tool used Note 6(q)(v)((dd)(C) to Part 3 of Schedule 6 to the Customs and Excise Act determines that in the case of farming operations, the user is required to keep logbooks in respect of fuel supplied to each vehicle or other equipment used. In summary, separate records must be kept for each vehicle or category of equipment in respect of which the diesel rebate is claimed. Logbook requirements: Odometer readings The notes to Part 3 of Schedule 6 to the Customs and Excise Act does not specifically state that odometer readings are required. The critical issue though is that the person claiming the rebate must be able to prove that the vehicles or equipment have actually been used for eligible purposes. This kan only be done by having regard to objective evidence proving how the vehicle or equipment has been used (the logbooks). SARS have issued a draft logbook format that would comply with the requirements of the diesel rebate (see attached). You will note that where distance can be measured, it must be inserted on the logbook. Where it is not possible, the hours that the eligible equipment has been used for eligible activities must be logged.