Zakat and Merchandise...

[Salikah Muslimah]

Asalamu 'alaikum wa rahmatullah,

I feel I need to ask this question since I am entering the world of trade inshaa Allah. From what I have read, we pay zakat on the "current market value", which is the current price of the product? So, if the total market value of merchandise adds upto that of the nisaab of gold or silver, we pay zakat on this amount? What if, some of the market value is used again to buy more merchandise? Or is zakat only on stock that has not yet been sold?

For example: Total market value "£2000" at the end of the year and the stock hasn't been purchased, do we pay zakat for all those merchandise?

If all of the stock has been sold, yet some money from the profit has been put into savings- do we still have to pay zakat on that sold stock?

Another sub question, the nisaab for gold amounts to a higher amount of money and the nisaab for silver is lower. Does this mean, if one has enough money to meet the nisaab for silver...but not enough to meet the nisaab for gold, that they are obliged to pay zakat?

Sorry, if I am confusing anyone, I haven't paid zakat ever before. Can anyone also suggest to me a simplified book on the fiqh of trade and zakat inshaa Allah?

JazakumAllahu khair.

[Talib84]

Asslamu Alikum

Here is the method of calculating zakat.

http://www.askimam.org/fatwa/fatwa.p...3654a8ff96f4e6


Regarding the current market value of stock, I would appreciate if someone could also clarify this for me as well.
I always hear people say that market value of an item is the average retail price of the item. However it is mentioned in Spiritual Discourses that Mufti Taqi Uthmani says something to the effect that the value of stock is the price you would receive if you were to sell all of the items in stock at once. This value would be less than the wholesale price of the items in stock. It would however be safer to calculate the value of stock using the wholesale price. There is no mention of retail price. This is not the exact quote but my understanding of it.

[Ali al-Hanafi]

Asslamu Alikum

Here is the method of calculating zakat.

http://www.askimam.org/fatwa/fatwa.p...3654a8ff96f4e6


Regarding the current market value of stock, I would appreciate if someone could also clarify this for me as well.
I always hear people say that market value of an item is the average retail price of the item. However it is mentioned in Spiritual Discourses that Mufti Taqi Uthmani says something to the effect that the value of stock is the price you would receive if you were to sell all of the items in stock at once. This value would be less than the wholesale price of the items in stock. It would however be safer to calculate the value of stock using the wholesale price. There is no mention of retail price. This is not the exact quote but my understanding of it.

The Zakaatable assests are the following...

...(iv) The whole-sale value of the balance of stock-in-trade (including raw material) at that date, irrespective of the period of their retention.

Contemporary Fataawa, 'How to Calculate Zakah on a Business?'

In valuing stock, the test of the market value is as follows: What would a willing buyer pay to a willing seller if all the stock were sold in bulk in a single transaction on the valuation date?

Contemporary Fataawa, editor's footnote in question, 'How to Calculate Zakah on a Business?'

[Talib84]

Assalamu Alaikum

Jazak Allah

Does anyone know if all parties take the same value when calculating zakat. Does the market value of the item differ for the manufacturer, the wholesalers, and the retailers. If we are using the wholesale price to be safe then this would be the cost price for the retailer, but for the wholesaler the wholesale price is what he sells at, which is more than his cost.

[Ali al-Hanafi]

Assalamu Alaikum

Jazak Allah

Does anyone know if all parties take the same value when calculating zakat. Does the market value of the item differ for the manufacturer, the wholesalers, and the retailers. If we are using the wholesale price to be safe then this would be the cost price for the retailer, but for the wholesaler the wholesale price is what he sells at, which is more than his cost.

As far as I am aware, the market value is the value of the product in the market the business trades in. So for the wholesaler, the value of the goods is based upon the price of the goods in the wholesale market and for a retailer, the value of the goods is their price in the retail market. However, I'll have to confirm this with a Scholar so bear with me (or if anyone else can help, that'll save me some time!)

[Talib84]

Jazak Allah

So what you and I have mentioned from Mufti Taqi Uthmani would not apply to a retailer then.

[Husain]

The value of the stock to each person is the value he sells the goods for under normal circumstances.
This applies to all: the manufacturer, wholesaler and retailer.
This is the fatwa mentioned in most of the Urdu Fatawa such as Imdad al-Fatawa, Ahsan al-Fatawa, Fatawa Mahmudiyyah, Fatawa dar al-Ulum Zakariyya etc.

Mufti Taqi saheb's view is contrary to this. I have discussed his view with a number of ulama and havn't been able to understand the basis for it.

And Allah Ta'ala knows best

[Talib84]

Jazakallah Mufti Husain for taking the time to post. One more question. My business is mostly based on credit. Most of the goods is sold at a credit price, which is higher than the normal retail price in other businesses. It takes a long time for the customers to repay the debt. If someone pays cash I sell thaem at a cheaper cash price. Which price should I use in calculating the market value for my stock, the avergae retail price of the item or the credit price which I sell at.

Jazak Allah

[Husain]

The price of other retailers isn't considered, you only consider your own price.

You could look at your situation in one of two ways:
As you sell the majority of your goods for the higher credit price, that is your normal price. If someone happens to pay cash, this would be an exception to the rule, thus it wouldn't be considered. Based on this rationale, you would calculate all your goods according to the higher credit price, which is your normal price.

The other way would be to approximate the percentage of your stock that would be sold at the credit price and the percentage that would go at the cash price. It is possible that you normally sell only about 10% of your stock at the cash price, and 90% at the credit price. You could then use the cash value for 10% and the credit value for the remainder.

Hazrat Thanwi prefers the first method, which is the more cautious one. I personally feel the second to be more accurate for a businessman who does have a pretty accurate idea of how much he would sell at each price.

And Allah Ta'ala knows best

[Ali al-Hanafi]

The value of the stock to each person is the value he sells the goods for under normal circumstances.
This applies to all: the manufacturer, wholesaler and retailer.
This is the fatwa mentioned in most of the Urdu Fatawa such as Imdad al-Fatawa, Ahsan al-Fatawa, Fatawa Mahmudiyyah, Fatawa dar al-Ulum Zakariyya etc.

Mufti Taqi saheb's view is contrary to this. I have discussed his view with a number of ulama and havn't been able to understand the basis for it.

And Allah Ta'ala knows best

Hadhrat,

Is it possible that by "whole-sale", Mufti Taqi Sahib is referring to the sale of the entire stock in one transaction rather than the purchase price of the goods? when I first read the passage in 'Contemporary Fataawa', the impression I got was that Mufti Sahib was referring to the purchase price of the goods but the footnote seems to suggest that "whole-sale" refers to the selling price of all the goods in one go.