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[FAQ] VAT on fuel charged by a logistics company
- 28 May 2021
- VAT
- The Tax Faculty Tax Specialist
This article is based on tax law for the year ending 28 February 2021.
Question
Can a logistics company split its charges to customers on its tax invoices into two different components, the two components being fuel and other? This would result in it charging VAT at the zero-rate on the fuel component.
Answer
The VAT Act
Section 7(1)(a) of the VAT Act imposes VAT on the supply of goods or services made by a vendor in the course or furtherance of the VAT enterprise carried on by the vendor. VAT is imposed at the standard rate of (currently 15%), unless the supply qualifies to be supplied at the zero-rate in terms of section 11 of the VAT Act or is exempt from VAT in terms of section 12 of the VAT Act.
Section 11(1)(h) of the VAT Act zero-rates goods consisting of fuel goods referred to in Fuel Item Levy numbers 195.10.03, 195.10.17, 195.20.01 and 195.20.03 in Part 5A of Schedule No.1 to the Customs and Excise Act (these items include diesel and fuel).
Application of the principles
Where a single fee is charged for a taxable supply of goods or services and fuel is merely consumed in the process of delivering the goods or services, the entire fee will be subject to VAT at the standard rate (on the assumption that it is a standard-rated supply).
Where a distinct and separate charge is made for the fuel used, the charge for the fuel would be zero-rated in terms of section 11(1)(h) of the VAT Act, and the charge for other services standard rated (on the assumption that it is a standard-rated supply).
Webinar Commentary
Refer to the following webinar: Monthly Tax Update - May 2021 here.