Zakat and Merchandise...

[Husain]

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.

Yes, Mufti Taqi sheb is clearly talking about selling all in one go. This is the view which doesn't make sense to me at all.

Here is a portion of a discussion I had with an alim on the issue:

What is the source of this view from the classical Fiqh works
"You will use the price a willing buyer will pay a willing seller to purchase the entire goods at once"
and the logic behind it?

This wouldn't be the wholesale price, but would instead be much less than the wholesale price.

A person could have a shop stocked full of goods, which he would expect to retail at R500 000.
If each item had to be calculated at its individual wholesale price, the value of the stock would probably be around R350 000.
However if he has to look for someone to purchase all his stock in one go, he would probably struggle to find someone to even pay him R250 000.

Similarly is the case with a manufacturer. If he attempts to sell off all his stock to one person, he would have to sell it for at least half the price he normally sells it to wholesalers for.

Then what price would a wholesaler use?
The price he buys it for or his selling price, as the wholesalers selling price is what is termed the "wholesale price" in the market, yet no willing buyer would ever pay that price if taking the entire stock.

[Ya_Rahimo]

Assalamoalaikum,

If ones half jewellary is with her mother and half with the mother in law. Is zakat still fard on that person?

jazkaAllah khair

[Talib84]

Assalamu Alaikum

This is what Mufti Muhammad ibn Adam says.

2) Zakat is obligatory on the current market value of merchandise. Many people with regards to this make a grave error by calculating Zakat on the buying price of goods. This is incorrect, as Zakat is obligatory on the current market value. For example, if one has a bookshop, then Zakat will be obligatory on the market value of all the stock (books).

However, when calculating Zakat on merchandise, one can keep in mind the total value of all the goods. For example, I have a textile factory in which goods are prepared. Now, I have a wholesale price, a retail price, and a price for selling all my goods at once. When I calculate Zakat, it is permissible that I calculate it according to the third price, which is the value of the goods when selling them all at once, although it is preferable and advisable to calculate Zakat on the normal wholesale price.

http://www.daruliftaa.com/question.a...nID=q-23242113

I still don't understand Mufti Sahib's view fully . Mufti sahib says people make a mistake by calculating zakat on the buying price of goods. Then he says a bookshop owner should use the market value of the books. Then he furthers shows the method of calculating zakat of merchandise. According to Mufti sahib the market value of the books would be either the price for selling all the goods at once, or the safer option would be the wholesale price. I assume the bookshop owner buys is his books at the wholesale price and then retails them so would this market value not be the cost price for the bookshop owner?

I understand the textile factory example, as the cost of producing the products would be less than the price for selling all my goods at once.

Or are these two senarios separate, and the method of calculating zakat of merchandise shown by Mufti sahib only applicable for manufacturers?

[Ali al-Hanafi]

I assume the bookshop owner buys is his books at the wholesale price and then retails them so would this market value not be the cost price for the bookshop owner?

No, he may have bought the goods at a price different from the wholesale one.

[Talib84]

Assalamu Alaikum

Yes that is also possible. I was looking at it from my case, where the wholesale price is my cost price. I am not arguing against Mufti Husain's view, but mereley understanding Mufti Muhammad's view.
The situation would differ for each indivdual. In my business, we have people who import from primary sources abroad and then wholesale the goods to retailers. We also have people who import from secondary sources abroad and retail most of their goods, but also wholesale some of the goods. Then we have the people who buy from these local wholesalers and then retail the goods. So if the bookshop owner was from the third case then the wholesale price would be his cost.

[zahed73]

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