Answered by Shaykh Faraz A. Khan
Question: I am in the fabric industry, and as such have buildings full of rolls of fabric that I retail. Do I need to pay zakat on all that fabric?
Some of the fabric has been damaged by flooding and is thus worthless. A lot of other fabric hasn’t sold in years, is extremely unpopular and is thus dead weight.
I don’t remember how much I bought all that fabric for. I don’t have fixed prices as most of the customers are accustomed to bargaining, so how would I calculate the worth of all that material?
Also, the business in not doing well, I have mortgages and debt. If I were to pay 2.5% of the inventory it would be an immense financial blow to as there is a HUGE amount of inventory that nobody wants to buy! If I don’t have to pay zakat on that inventory, what should I do about all those years that have passed without my paying zakat? I would probably need to sell off the business (which is my only means of livelihood) in order to pay off 20 years worth of zakat!
Answer: Assalamu alaikum wa rahmatullah,
I pray this finds you in the best of health states.
The basis of zakat on trade goods is that one owes 2.5% of the current market value of the item at the time zakat is due. [Ibn Abidin, Radd al-Muhtar]
Therefore, no zakat is due for damaged fabric that is worthless, from the time it was damaged. Also if fabric is not sellable (due to being unpopular, etc.), then it to has essentially no market value, so no zakat would be due on it either.
It is of no consequence if the owner does not remember how much he originally paid for the item, since current market value at the time zakat is due is what is given consideration. Market value is determined by estimation and/or consultation with market experts of the item in question.
Based on this, the owners certainly do not have to pay 2.5% of the entire inventory, but rather only of those items that are sellable and have market value.
Lastly, in general for past years of unpaid zakat, one simply estimates to the best of one’s ability how much is owed, and then this amount is effectively a debt to Allah Most High. It does not have to be paid immediately, especially if doing so would entail undue hardship. Rather, it can be paid slowly over time, in a manner that allows one to continue to run one’s business and comfortably provide for oneself, one’s family and general expenses.
And Allah knows best.
Faraz A. Khan
Checked & Approved by Faraz Rabbani