Finance Minister Enoch Godongwana confirmed the government will implement an inflation-linked increase to the general fuel levy, marking the first such increase in three years.
This comes after the decision to abandon an increase to Value Added Tax (VAT), which remains at 15%. VAT in South Africa has been a hot topic since a potential 2% VAT hike led to a delay in the budget speech in February, and later, proposed increases of 0.5% for 2025 and 0.5% for 2026.
The Minister confirmed that, effective from 4 June 2025, the general fuel levy will increase by 16 cents per litre for petrol and 15 cents per litre for diesel.
For the 2025/26 fiscal year, this is the only new tax proposal that I am announcing. This is the first fuel levy increase in three years. It means from the fourth of June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel.
The National Treasury's goal of implementing a budget that supports sustainable finances, the social wage, and investments in economic growth remains. However, expected revenue lost following the reversal of the VAT increase needs to be recouped somewhere.
Minister Godongwana told the public and Parliament that the government's overarching goal remains to balance economic growth with the urgent need to repair and rebuild public finances.
I want to assure the public, and this House, that the aim of the March 12 budget was to balance the necessity of growing the economy with the equally urgent need to repair and rebuild our public finances. This remains our goal,
Godongwana confirmed that the planned expansion of the zero-rated basket of goods, which was intended to mitigate the impact of a VAT increase on lower-income households, will no longer be implemented.
The government had planned to list zero-rated food to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry, and other animals. This was being done to cushion households from the impact of the VAT increase.
Downward Revision in Tax Revenue Projections
The reversal of the VAT increase, coupled with a weaker economic outlook, has led to a downward revision in tax revenue projections. Compared to the March estimates, tax revenue is now projected to be R61.9 billion lower over the next three years.
Minister Godongwana cautioned that this increase in the fuel levy alone will not be sufficient to close the fiscal gap over the medium term. As a result, the 2026 Budget will need to propose new tax measures aimed at raising an additional R20 billion.
