VAT 101 - VAT on Fuel

 VAT 101 - VAT on Fuel

By Nikki Viljoen – Viljoen Consulting (Pty) Ltd 

Please note that this pertains to South African VAT (Value Added Tax) and Best Practice requirements.

We all know (well I hope we do) that we cannot claim VAT on the fuel that we use.

So how do we handle VAT and fuel levies? How do we claim back all that we can without falling foul of the law?

Let’s call in the protagonists.

Mike owns a transport company that collects fresh produce from all over the country and delivers it to the various branches of his clients, again all over the country.

With the various increases in fuel that we as South Africans have experienced over the last two years and Mike has been forced to introduce a fuel levy to his delivery charges on all of his deliveries.  Mike being an honorable man ensures that if the fuel price decreases, so do his levies, so the levy therefore fluctuates from month to month.

According to the law, Mike meets the minimum requirements and he is a registered VAT vendor.  Mike has to charge VAT.

The ‘fuel levy’ is not zero-rated.  It is a charge that Mike levies in respect of the service that he supplies and it is therefore not exempt.

You see Mike is not supplying fuel to his clients, he is supplying a service – the fuel levy now becomes a part of the services that Mike provides, much the same as the cost of maintenance of the vehicles is factored into Mike’s costs and therefore Mike is quite entitled to charge VAT on the fuel levy.

Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or http://www.viljoenconsulting.co.za