Goods-In-Transit, Debts and Zakat

A business is a going concern and the movement of goods can be very fluid. Imagine a store owner [and this is equally applicable to a corporate organization] who sells fabric, and one full hijri year has passed on goods that are in the store.

This businessman has debts connected to those goods and some of them have been bought on credit, meaning that part of the value has been paid and the rest is deferred. And there are some debts on the store, in addition to annual costs, such as rent for the store and government fees etc.

Similarly there are some orders that are en route for the business as goods-in-transit. Would the goods-in-transit, the debt owed him and the debt he owes feature in his computation of the zakaah? This scenario presents several areas of concern that must be cleared.

We explain them briefly as follows:

Timing: It should be noted that the year with regard to trade goods starts at the time when you acquired the cash with which you bought the goods. If the businessman owned the minimum threshold (nisaab) of cash in Muharram, then he bought trade goods with it in Ramadan, then the one-year due date for the trade goods comes in the following Muharram and not in Ramadan.

Please note that when the zakaah becomes due and the business does not have the cash to pay for the zakaah, it is permissible to pay zakaah on the trade goods in the form of the goods or in the form of part cash and part goods.

Debts That You Owe: The debts that you owe whether they are for the price of the goods or otherwise should not be subtracted from the wealth on which you are paying zakaah. So if the goods are worth 50,000, and you owe debts of 30,000, then you have to do zakaah on the whole 50,000.

As for the government fees and the rent of the store, if the time for paying them has come and they have been paid before the end of the zakaah year, then there is no zakaah on them, because that is wealth that was spent before the end of the year. But if payment of them is delayed until after the year has ended, they should not be subtracted from the wealth on which you are going to pay zakaah.

Goods-In-Transit: With regard to the orders that are en route to you, if you already bought these orders and the contract of sale has been done, then they should be included in your possessions and should be counted as part of the wealth on which zakaah is to be paid, whether you have paid their price in full or in part, or if you have not paid anything yet, because debts - as stated above should not be subtracted from wealth that is subject to zakaah. But if you have not bought them yet, then they should not be counted as part of the wealth on which zakaah is to be paid, because they are not in your possession. And Allaah knows best.

This article was culled from the publications of Deen Communication Limited


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