Zakat on cost or retail price
Do I pay Zakat on the cost price of the fabric and clothes that I sell or the retail price? If it is the retail price, it would mean that I am paying Zakat on a value of profit which is not guaranteed because there are often discounts in the shops.
بسم الله الرحمن الرحیم
Zakat will be calculated according to the market value of the goods on a person’s Zakat anniversary. The market value is the amount for which something can be sold easily, it can be less than the purchase price or more. Generally, the retail price is a good indicator of the market value, although sometimes retail prices are inflated. Thus, where relevant, discounts can be factored in when ascertaining the market value of any item. One method of thinking about this is that if a person dies, what would the stock be valued at for inheritance purposes or how much would it sell for.
It should also be noted that it is not necessary to discharge Zakat via money. 1/40th of the stock can be given as Zakat.
Allah knows best
21 Dhū al-Qaʿdah 1441 / 13 July 2020
Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir