Petrol prices in South Africa have been steadily increasing over the past few years, causing much frustration for local motorists. One question that often comes up regarding the makeup of the petrol price is whether or not Value-Added Tax (VAT) is charged on petrol purchases.
Most items purchased by consumers in South Africa have 15% VAT added onto the price at checkout. Certain basic food items, public transportation, and some financial services are zero-rated or exempt from VAT. But otherwise, virtually all consumer goods and services carry the 15% VAT charge.
This article will examine if VAT is applied to petrol in South Africa and break down the various taxes and levies that contribute to the retail price.
Breaking Down Tax Components of Petrol Price
The retail price of petrol in South Africa is impacted by various taxes, levies, and other costs that are added on by the government, fuel producers, transporters and retailers. These components include:
Basic Fuel Price: This covers the actual costs of producing and importing crude oil and is based on international petroleum prices. It makes up around 45% of petrol’s retail price.
Fuel and Road Accident Levies: The government adds various fuel levies to help fund road maintenance, accident compensation funds, and other initiatives. These account for around 5% of the petrol price.
Storage, Distribution, and Retail Margins: There are built-in profit margins for storage at facilities, transportation via pipelines and trucks, and sales by petrol station operators. These margins represent approximately 17% of the petrol price.
Slate Levy: A relatively new tax that was introduced in 2022 to help stabilize fuel prices when international oil prices swing drastically. Makes up around 5% of price.
Carbon Tax: Implemented to incentivize reduced greenhouse gas emissions. Carbon tax is 2% of retail petrol price.
Petrol Prices Are Exempt From VAT
Unlike most consumer goods and services in South Africa, petrol does NOT have VAT added at the time of sale. Petrol prices are exempt from being charged standard VAT.
However, when calculating some of the fuel, accident, slate and carbon levies added onto the basic fuel price, there may be some embedded VAT costs borne by producers or importers along the petrol supply chain. But VAT is not directly charged to consumers at the petrol pump. You can also use our VAT Calculator to the VAT calculation job for you.
The South African government likely excluded petrol from VAT charges given it is an essential transportation fuel for most South African consumers and businesses. Adding another 15% sales tax was seen as overly burdensome.
So the short answer is no – standard 15% VAT does not apply to retail petrol prices in South Africa. But the fuel price still carries significant taxes and levies imposed by the government. It’s just that VAT is not one of them at the final point of sale.
Impact of Taxes on Petrol Affordability
While South African motorists may be glad VAT isn’t added onto the petrol price they pay, the total taxes and levies still make up around 35% of the retail petrol price. This heavy tax burden strains the affordability of petrol for many households and businesses.
And when international crude oil prices spike, South Africa’s fuel taxes magnify the pump price increases. For example, Brent crude doubled from around $50/barrel in late 2020 to over $100/barrel in mid-2022. But the inland petrol price in South Africa during that period shot up by around 75% – from around R12.50/liter to over R21.50/liter.
The inflated taxes in the fuel price formula amplified the impact of the global oil price jumps. This sparks calls for government fuel tax relief when petrol prices soar to uncomfortable levels.
Some economists argue the high fuel taxes constrain South Africa’s overall economic growth. Reduced VAT and fuel levies could make transport more affordable – benefiting commuters, logistics firms, manufacturers, retailers, and other sectors.
But the government depends heavily on fuel taxes as an established revenue source for its budget. Finding the right balance between affordable fuel prices and tax income remains an ongoing challenge.
Outlook for Petrol Prices and Taxes
Petrol prices in 2023 have pulled back around 25% from the peak reached in 2022. However, they remain elevated by historical standards. Global crude oil markets and foreign exchange rate fluctuations will continue to drive pricing ups and downs.
While standard VAT does not apply to petrol in South Africa, the array of built-in taxes and levies are likely here to stay. The South African government has a massive budget deficit it is attempting to close. This needs tax revenue sources like petrol taxes.
However, public pressure and protests have compelled temporary petrol tax cuts in the past. If prices spike well above inflation for extended periods, we may see similar tax relief measures.
But in general, taxes and levies make up a major part of the petrol pricing formula – so fluctuations in global oil prices get amplified locally. South African motorists are left hoping for stability in crude oil markets and the Rand exchange rate to avoid more extreme petrol price swings.
So does petrol have VAT in South Africa? No, it is exempt from the 15% value-added tax applied to most goods and services. But the retail price consumers pay at the pump still includes significant taxes and levies imposed by the government. These taxes account for over a third of the total petrol price – magnifying the impact of volatile global crude oil prices.
While removing VAT from the pricing equation provides a small benefit, the overall tax burden leaves petrol less affordable for most South African households and businesses. The government must weigh these economic impacts against its critical need for tax revenue sources. This tension will likely keep fuel taxes elevated despite public frustration over rising petrol costs.
Does Diesel Or Other Fuels Have VAT In South Africa?
Like petrol, diesel and other automotive fuels like paraffin are exempt from VAT charges in South Africa. The tax and levy structure does vary somewhat by fuel type. But no major transportation fuels consumed by average South African motorists are subject to the standard 15% VAT rate.
Does Petrol Have VAT In Other African Countries?
Most African countries also exclude petrol/transportation fuels from standard VAT charges, or have specific fuel excise taxes rather than sales taxes. However fuel tax rates vary widely – from over 100% of pump price in Zimbabwe, to lower 12% rates in Mozambique.
When Did VAT Start Being Applied To Goods And Services In South Africa?
VAT first introduced in South Africa in 1991 at 10% rate, later increased to 14% in 1993 after apartheid era. The current standard VAT rate of 15% came into effect in April 2018. Fuel has remained VAT exempt since inception.