Calculating Zakaat on Cost or Selling Price

Q: When calculating zakaat of a business which price should be taken into consideration; the cost price or the selling price? In the case that it is calculated on the selling price then which selling price is considered.: My selling price or the general selling price? I ask this because in the nature of my business it is such that I have to display a high selling price and when the customer wants to buy the item, I end up giving a discount. As a result my selling price on display is not always the price that I sell the item at.

A: Nowadays the retail price of goods is not fixed but fluctuates quite drastically from seller to seller, especially with the culture of discounting prices prevalent in our business societies. Chain stores have a much lower retail price than corner shops, and so forth. Furthermore, the value of wealth for zakaat purposes is based on the principle of appreciation. Whichever value becomes the benchmark of wealth appreciation is considered the basis for zakaat evaluation.

In business, the retail price is not always a proper reflection of the value of one's stock, because of the discount syndrome, as you referred to in your question. If a business owner has to sell up, he would never realize the retail value of his stock. Therefore, from a fiqhi point of view, we should consider the CURRENT MARKET VALUE of stock for calculation of zakaat, which is the value prevalent among wholesalers. This means that at the time of calculating zakaat the shopkeeper should find out the current wholesale value of his stock. He must take into consideration the price he would pay for the same stock if he had to buy it from his normal suppliers at that point in time. And Allah Knows Best.