Detailed Zakat Information

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Business Merchandise Inventory

Business merchandise inventory is normally acquired for the purpose of resale. In such a case, the asset qualifies for Zakat purposes. Zakat must be paid on the fair market value calculated as at the end of the relevant Zakat year. In arriving at the fair market value of the merchandise inventory, the trader is not obliged to compute the retail selling price of each item. He may fix a price based on the original cost price plus an estimated overall average mark up for the business concerned. He may even fix a bulk price for his merchandise inventory as a composite whole being the price he would receive if his entire merchandise inventory were sold in the open market at once. The price so determined would, having regard to inflation, invariably exceed the original cost price. It must be noted that, in the case of the manufacturer of goods, the merchandise inventory would comprise both raw material (e.g. fabric) and the finished goods.

This requires a fourth of a tenth (2.5%) Zakat to be paid on them, when they remain a full year without decreasing to zero. The minimum amount of the value of business merchandise that requires Zakat to be paid is the same as gold and silver, and the merchant could use either standard to estimate how much Zakat he should pay.

To read more about detailed information on Zakat, click here…

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