Zakat on Business Inventory
Business inventory represents one of the most significant categories of zakatable wealth for Muslim entrepreneurs, yet it remains one of the most misunderstood aspects of Zakat calculation. Whether you operate a retail store, run a wholesale distribution business, manage a manufacturing operation, or sell products online, your business inventory held for trade purposes is subject to annual Zakat. Understanding exactly how to calculate Zakat on business inventory, which items to include, how to value inventory at cost versus market price, treatment of raw materials and work in progress, handling of slow moving or dead stock, and the authentic Islamic evidence supporting these rulings is essential for fulfilling your Zakat obligation correctly.
The core principle of Zakat on business inventory is straightforward: all goods you hold with the intention to sell are zakatable trade goods subject to 2.5% annual Zakat when your total wealth exceeds nisab for one lunar year. This includes finished products ready for sale, raw materials that will become products, work in progress items being manufactured or assembled, goods purchased on credit or payment terms, inventory in your warehouse or third party storage, and any stock held for eventual resale regardless of how long it has been sitting. This comprehensive guide explains everything Muslim business owners need to know about Zakat on business inventory with detailed examples, valuation methods, special cases, and complete Quranic and Hadith evidence.
Foundation
What constitutes business inventory for Zakat purposes
Understanding which business assets are zakatable inventory versus non zakatable business property.
Trade goods held for resale are zakatable inventory
Business inventory for Zakat purposes means all goods and products you hold with the intention to sell to customers for profit. This is called trade goods or stock in trade in Islamic jurisprudence. The critical determining factor is your intention when acquiring the inventory. If you purchased or manufactured items specifically to sell them and generate revenue for your business, those items are zakatable business inventory. This applies to every type of business that holds physical products: retail stores selling to consumers, wholesale distributors selling to retailers, manufacturers producing goods for sale, online sellers managing warehouses, restaurants holding food ingredients, construction companies with materials for projects, and any other commercial enterprise dealing in physical products.
The scope of business inventory that qualifies as zakatable trade goods is comprehensive. For retail businesses, this includes every item on your shelves, in your stockroom, in your warehouse, and in transit from suppliers. A clothing retailer pays Zakat on all shirts, pants, shoes, and accessories held for sale. A grocery store pays Zakat on all food products, beverages, and household goods in stock. An electronics retailer pays Zakat on computers, phones, appliances, and accessories. For wholesale businesses, inventory includes all products purchased from manufacturers or importers that you will resell to retailers or other wholesalers. For manufacturing businesses, zakatable inventory extends beyond finished products to include raw materials that will become products and work in progress items currently in production.
Example: Retail store inventory categories
You operate a home goods retail store. On your Zakat date, your inventory includes: 450 items on sales floor displays valued at wholesale prices totaling £28,000. Backroom storage holding another 380 items worth £19,500 at wholesale. A warehouse across town with bulk inventory of 920 items valued at £47,200. Goods in transit from your supplier that legally belong to you worth £8,300. Total zakatable business inventory: £103,000. All of this represents trade goods held for resale to customers, making the entire inventory subject to Zakat calculation as part of your total wealth.
Business assets for use are not zakatable inventory
Not everything your business owns is zakatable business inventory. Assets purchased for business use rather than resale are exempt from Zakat as they serve operational purposes, not trade purposes. These non zakatable business assets include the building or property where you conduct business, machinery and equipment used in manufacturing or operations, vehicles used for deliveries or business transportation, computers and technology for business management, furniture and fixtures in your office or store, tools and equipment for production or service delivery, and supplies consumed in operations rather than sold to customers.
The distinction between zakatable inventory and non zakatable business assets comes down to intention and purpose. A furniture manufacturer owns lumber, which is zakatable raw material inventory because it will become furniture products for sale. The same manufacturer also owns saws, sanders, and assembly equipment, which are non zakatable business assets because they are tools for manufacturing, not items for resale. A restaurant owns food ingredients like flour, vegetables, and meat, which are zakatable inventory because they will become meals sold to customers. The same restaurant owns ovens, refrigerators, tables, and chairs, which are non zakatable business assets used in operations. Understanding this distinction ensures you include everything that should be zakatable while correctly excluding operational assets. Learn more about distinguishing business categories in our Self Employed Income guide.
Complete business Zakat calculation
Calculate Zakat on business inventory plus all other wealth
Include your business inventory value with personal wealth for complete annual Zakat.
Calculate Your Zakat →Valuation
How to value business inventory for Zakat calculation
Cost price versus market value, wholesale versus retail pricing, and scholarly positions on inventory valuation.
Market value versus cost price for inventory Zakat
One of the most important questions for Zakat on business inventory is the valuation method: should you value inventory at the original cost you paid to acquire it, or at current market value on your Zakat date? Islamic scholars have discussed this extensively, and the majority position from all four schools of Islamic jurisprudence is to value zakatable business inventory at current market value, not historical cost. Market value means the price you could reasonably sell the inventory for on your Zakat date under normal market conditions. This approach reflects the actual worth of your trade goods at the moment Zakat becomes due.
The reasoning behind market value is that Zakat should be calculated on real current wealth, not outdated figures. If you purchased inventory for £10,000 two years ago but current market conditions mean you could only sell it for £7,000 today, using market value of £7,000 is more accurate and just. Conversely, if inventory purchased for £10,000 has appreciated and could now sell for £13,000, the £13,000 market value represents your actual current wealth from that inventory. Market value ensures Zakat calculation reflects economic reality on your Zakat date rather than historical transactions. However, calculating exact market value for extensive inventory can be complex, which leads to the wholesale versus retail pricing question.
Wholesale businesses use wholesale market prices
If you operate a wholesale distribution business, value your inventory at current wholesale market prices on your Zakat date. You sell to retailers at wholesale prices, so that is the relevant market value for your inventory. Check current supplier catalogs, industry price lists, or recent wholesale transactions to determine accurate wholesale values. If you purchased inventory six months ago for £45 per unit wholesale and current wholesale price is now £48 per unit, use £48 for Zakat calculation. If wholesale prices have fallen to £42 per unit, use that lower current figure.
Retail businesses and market value complexity
Retail businesses face a scholarly difference of opinion. Some scholars say retail inventory should be valued at the price you would get if selling to wholesalers, essentially the wholesale value. Other scholars permit using retail prices minus expected markdowns and discounts. The most cautious and widely accepted approach is to value retail inventory at current wholesale replacement cost or the price you could obtain selling quickly in the current market, not full retail price. This prevents overvaluation while remaining realistic about actual market worth.
Practical inventory valuation for complex businesses
For businesses with thousands of inventory items, determining individual market values for each product on Zakat date is impractical. Islamic scholars recognize this challenge and permit reasonable estimation methods that approximate market value. One accepted approach is to use your inventory management system to generate a report of current inventory quantities, then apply current wholesale or market prices from your suppliers. Another method is to use the lower of cost or market value principle, where you value each item at either what you paid for it or current market value, whichever is lower. This conservative approach ensures you do not undervalue inventory while protecting against calculation errors.
For manufacturing businesses, valuing work in progress inventory requires additional consideration. Partially completed products have value representing the raw materials consumed plus labor and overhead invested in production so far. A reasonable approach is to value work in progress at the cost of materials and production inputs invested to date, as this approximates the market value of the incomplete items. Finished goods should be valued at current wholesale market prices just like any other completed inventory. Raw materials are valued at current replacement cost, which is the price you would pay to purchase the same materials today. These principles ensure comprehensive and accurate Zakat calculation on all forms of business inventory.
Manufacturing
Zakat on raw materials, work in progress, and manufacturing inventory
How manufacturing and production businesses calculate Zakat on inventory at all stages of production.
All stages of production inventory are zakatable
Manufacturing businesses face unique complexity in Zakat on business inventory because inventory exists in multiple forms simultaneously. Unlike retail businesses where inventory is finished products ready for sale, manufacturers hold raw materials not yet used in production, work in progress items currently being manufactured, and finished goods completed and ready for sale. Islamic law is clear that all three categories are zakatable business inventory because all represent trade goods intended for eventual sale, just at different stages of the production process. A furniture manufacturer pays Zakat on lumber in the warehouse, partially assembled chairs on the production line, and completed furniture ready to ship to retailers.
Raw materials are zakatable because they will become finished products for sale. A textile manufacturer holds cotton, dyes, and thread as raw materials. These inputs will become fabric products sold to clothing manufacturers or retailers. The intention at time of purchasing raw materials was to use them in production for eventual sale, making them trade goods. The fact that they have not yet been processed into final products does not change their status as zakatable inventory. On your Zakat date, count all raw materials in your warehouse or storage, value them at current replacement cost or market prices, and include the total in your Zakat calculation.
Example: Bakery manufacturing inventory
You operate a commercial bakery producing bread, pastries, and cakes for wholesale to restaurants and grocery stores. On your Zakat date, you conduct inventory count. Raw materials: 2,000 kg flour valued at current wholesale price £1,600, 500 kg sugar £450, 200 liters oil £380, 150 kg yeast £270, packaging materials £890. Raw materials total: £3,590. Work in progress: dough for 800 loaves currently proofing valued at material cost £640, 200 pastries in ovens valued at £380. Work in progress total: £1,020. Finished goods: 1,200 baked loaves ready for delivery £2,880, 450 completed pastries £1,260, 80 decorated cakes £1,840. Finished goods total: £5,980. Total zakatable business inventory: £10,590, which combines with your other wealth for Zakat calculation.
Work in progress valuation in manufacturing
Work in progress presents the most challenging valuation question for Zakat on business inventory. These are items that have consumed some raw materials and production resources but are not yet finished products. How do you value a partially assembled piece of furniture, a garment half sewn, or electronics in mid assembly? The scholarly approach is to value work in progress at the cost of inputs invested so far, meaning raw materials consumed plus reasonable allocation of direct labor and overhead. If you have invested £45 in materials and £20 in labor to partially complete a product, value that work in progress unit at £65 for Zakat purposes.
For businesses with sophisticated cost accounting systems, you may have precise work in progress valuations in your accounting records. Use those figures if they reasonably represent material and production costs invested. For simpler operations without detailed cost tracking, a conservative approach is to value work in progress at raw material cost only, excluding labor and overhead. This ensures you do not undervalue inventory while keeping calculation manageable. The key principle is that work in progress is definitely zakatable as it represents trade goods in production, and you must include it at a reasonable valuation reflecting invested costs or market worth.
Manufacturing and wholesale businesses
Include raw materials, work in progress, and finished inventory
Complete Zakat calculation covering all inventory stages at current market values.
Calculate Business Zakat →Slow moving stock
Dead stock, slow moving inventory, and outdated products
How to handle inventory that has not sold for extended periods and may have reduced value.
Slow moving inventory remains zakatable at market value
Many businesses accumulate inventory that does not sell quickly. Products may sit on shelves for months or years due to changing consumer preferences, seasonal variations, overstocking, or market changes. The question arises: is Zakat still due on inventory that has been sitting unsold for extended periods? The clear scholarly answer is yes, as long as you still intend to sell the inventory and it retains some market value. Slow moving inventory is still trade goods held for business purposes. The passage of time does not change the fundamental nature of the inventory as zakatable business assets. However, valuation requires realistic assessment of what you could actually sell the aged inventory for today.
Dead stock or obsolete inventory that has become completely unsellable is treated differently. If inventory has zero market value because it is damaged beyond repair, completely outdated with no buyers, expired and cannot be sold, or otherwise worthless, you may exclude it from Zakat calculation. The test is whether the inventory has any realistic selling price. A clothing retailer holding last season's styles that could be sold at clearance prices must include them in Zakat at current discounted market value. A technology retailer holding computer parts for models no longer manufactured that absolutely cannot be sold even at deep discounts may exclude truly worthless inventory. Be cautious and err toward including questionable inventory rather than excluding it.
Valuing aged inventory realistically
You operate an electronics retail business. On your Zakat date, most inventory consists of current products valued at normal wholesale prices. However, you also have older inventory: 45 smartphones from two generations ago originally costing you £180 each. Current market research shows you could sell these to a liquidator for £40 each. Value these units at £40 current market value, not £180 original cost. Total for aged phones: £1,800. You also have 12 tablets from five years ago that no longer have any market because the operating system is unsupported and no buyer exists. These may be excluded as worthless dead stock. Include the £1,800 for aged but sellable phones, exclude the completely obsolete tablets.
Markdown and clearance inventory treatment
Retail businesses frequently mark down inventory for clearance sales. Products that originally retailed for £80 may be marked down to £30 to clear stock. For Zakat on business inventory purposes, value clearance items at the realistic price you will receive, which is the marked down price. If you have designated 200 units for 60% off clearance sale, value them at the clearance price for Zakat calculation, not the original retail price. This realistic valuation ensures your Zakat reflects actual current market worth. The same principle applies to seasonal inventory being cleared at end of season, discontinued products being liquidated, or any other inventory you are selling below original pricing.
Some businesses have inventory that fluctuates between regular pricing and sale pricing throughout the year. A furniture store may run promotions reducing prices 30% several times yearly. For Zakat calculation, use the price status on your actual Zakat date. If your Zakat date falls during a promotional period when inventory is marked down, value it at promotional prices. If your Zakat date is during regular pricing, use regular wholesale or market values. The snapshot approach applies: whatever the realistic market value is on your specific Zakat date is what you use for calculation, regardless of pricing at other times during the year.
Credit terms
Inventory purchased on credit and accounts payable
How to handle inventory you have not yet paid for and the relationship between inventory and business debt.
Inventory is zakatable upon taking ownership, not upon payment
Business transactions frequently involve credit terms where you take possession of inventory but pay the supplier 30, 60, or 90 days later. The question for Zakat on business inventory is whether unpaid inventory counts as zakatable. The scholarly answer is that inventory becomes zakatable when legal ownership transfers to you, regardless of payment timing. If you purchased £25,000 worth of products on net 60 day terms, receiving the goods on the 1st with payment due on the 60th day, those goods are legally yours from the 1st. If your Zakat date falls before you have paid the supplier, the inventory is still zakatable because you own it.
This principle follows the Islamic legal concept that ownership determines zakatable status, not possession or payment. When inventory is delivered to you under standard commercial terms, ownership transfers even though payment is deferred. Your business has acquired trade goods for resale, making them zakatable inventory from the moment of ownership transfer. The corresponding accounts payable liability is a separate consideration that may affect your overall zakatable wealth calculation under certain scholarly opinions, but it does not change the fact that the inventory itself is definitely zakatable. Learn more about debt and Zakat in our comprehensive Does Debt Reduce Zakat guide.
Including unpaid inventory in Zakat calculation
You operate a wholesale distribution business. On your Zakat date of 1st Ramadan, your inventory consists of £87,000 in products you have fully paid for plus £34,000 in products received last week on net 30 day terms that you will pay by end of month. Both amounts are zakatable inventory because you legally own all goods. Total zakatable business inventory: £121,000. The £34,000 accounts payable for recent purchases is business debt that may reduce your overall zakatable wealth under some scholarly positions, but the inventory itself must be included at full value.
Inventory in transit and ownership timing
You ordered £18,000 in inventory from an overseas supplier. Goods shipped last month and are currently in international transit. Your purchase contract specifies ownership transfers when goods leave the supplier's warehouse. Therefore, you own this inventory even though it has not reached you yet. Include £18,000 in zakatable business inventory. Conversely, if your contract specifies ownership transfers upon delivery to your warehouse, goods still in transit are not yet zakatable. Check your purchase terms to determine ownership timing.
Business debt and inventory Zakat interaction
The relationship between business debt and Zakat on business inventory involves scholarly differences. All scholars agree the inventory itself is zakatable at full value. The question is whether business debts like accounts payable reduce your total zakatable wealth. The majority scholarly position states that immediate short term debts due within the year can be deducted from zakatable wealth before calculating Zakat. Under this view, if you have £121,000 in inventory but owe £34,000 in accounts payable due this month, your net zakatable wealth from business operations is £87,000. However, a minority position holds that business debts do not reduce zakatable wealth because the debt is operational rather than personal.
The practical implication for most Muslim business owners is to calculate Zakat on gross business inventory value, then separately consider whether to deduct immediate business debts from total wealth. The safest approach is to not deduct business debts and pay Zakat on gross inventory value, as this is the most cautious position ensuring you never underpay Zakat. If you choose to follow the majority position allowing debt deduction, only deduct debts that are immediately due, not long term business loans or lines of credit. Our Business Debt guide explains these positions thoroughly.
Include all inventory at ownership
Paid and unpaid inventory both count toward Zakat calculation
Calculate complete business Zakat on all legally owned inventory regardless of payment status.
Calculate Your Zakat →Real scenarios
Detailed examples of business inventory Zakat calculation
Step by step walkthroughs showing how different business types calculate Zakat on inventory.
Clothing retail store with seasonal inventory
Background: Sarah operates a women's clothing boutique. Her Zakat date is 15th Shaban. She holds inventory from current season, previous season clearance items, and upcoming season pre orders.
Inventory count on Zakat date: Current season clothing on sales floor: 280 pieces valued at wholesale cost averaging £35 per piece = £9,800. Stockroom current season: 150 pieces at £35 = £5,250. Previous season clearance items marked down 60%: 95 pieces originally £35 wholesale, now valued at £14 realistic clearance value = £1,330. Upcoming fall collection received last week but not yet displayed: 120 pieces at £38 wholesale = £4,560. Total inventory: £20,940.
Other business considerations: Sarah owes £4,200 to suppliers for recent inventory on net 30 day terms. Following the majority position, she can deduct immediate accounts payable. Net business inventory wealth: £16,740. She also has £8,300 in her business bank account and £12,500 in personal savings.
Complete Zakat calculation: Business inventory (net of payables): £16,740. Business cash: £8,300. Personal savings: £12,500. Total zakatable wealth: £37,540. Nisab is £420. Her wealth far exceeds nisab and has remained above it all year. Zakat due: £37,540 × 0.025 = £938.50.
Key insight: Sarah correctly values clearance inventory at realistic current prices, not original cost. She includes pre orders received even though not yet displayed. She deducts immediate accounts payable following the majority position. This comprehensive approach ensures accurate Zakat on business inventory combined with other wealth.
Restaurant with perishable food inventory
Background: Ahmed owns a restaurant serving Middle Eastern cuisine. His Zakat date is 1st Ramadan. Restaurant inventory consists of food ingredients with varying shelf lives.
Inventory categories: Dry goods and spices with long shelf life: rice, flour, lentils, chickpeas, spices totaling £3,850 at current wholesale prices. Refrigerated items purchased weekly: fresh vegetables, dairy, meat, currently holding £1,420 worth. Frozen inventory: meats and prepared items valued at £2,190. Paper goods and disposables: napkins, containers, cups purchased for use in service, not for resale to customers. These total £680 but are supplies consumed in operations, not trade goods, so excluded from Zakat calculation.
Inventory valuation: All food items are valued at current wholesale replacement cost since prices fluctuate frequently. Total zakatable food inventory: £7,460. Ahmed also includes restaurant equipment worth £45,000, but this is business property for operational use, not trade inventory, so it is not zakatable.
Complete calculation: Zakatable business inventory: £7,460. Business checking account: £14,200. Personal savings: £19,800. Total: £41,460. Zakat: £1,036.50.
Key insight: Restaurant businesses have lower inventory values due to perishable nature and frequent turnover, but all food ingredients held for preparation into meals sold to customers are zakatable trade goods. Supplies consumed in operations are correctly excluded.
Manufacturing business with three inventory stages
Background: Omar manufactures wooden furniture, selling wholesale to retailers. His Zakat date is 1st Muharram. He maintains inventory at all production stages.
Raw materials inventory: Hardwood lumber: 4,200 board feet at current wholesale lumber prices averaging £4.80 per board foot = £20,160. Hardware components (screws, brackets, hinges): £3,450. Stains and finishes: £1,890. Upholstery fabric: £5,670. Total raw materials: £31,170.
Work in progress: 18 dining tables in assembly, material cost invested £145 each, labor cost £80 each = £4,050 total. 24 chairs in finishing process, material £65 each, labor £35 each = £2,400. Total work in progress: £6,450.
Finished goods: 32 completed dining tables valued at wholesale price to retailers £380 each = £12,160. 96 completed chairs at wholesale £120 each = £11,520. 14 bedroom sets at £850 wholesale each = £11,900. Total finished goods: £35,580.
Total business inventory Zakat: £31,170 + £6,450 + £35,580 = £73,200. Combined with business cash £22,400 and personal savings £31,900, total wealth £127,500. Zakat: £3,187.50.
Key insight: Manufacturing businesses must count and value inventory at all three stages. Omar correctly values raw materials at current replacement cost, work in progress at invested costs, and finished goods at wholesale market prices. This comprehensive inventory accounting ensures complete Zakat calculation.
Online seller with third party warehouse inventory
Background: Fatima sells electronics accessories through Amazon FBA and her own website. Her inventory is stored in Amazon fulfillment centers and a third party logistics warehouse. Zakat date is 15th Shaban.
Inventory locations: Amazon FBA warehouses across the UK holding 4,800 units valued at average wholesale cost £12 per unit = £57,600. Third party warehouse holding bulk inventory: 2,200 units at £12 = £26,400. Inventory in transit from manufacturer in China: 1,500 units at £12 = £18,000 (ownership transferred when shipped per contract terms). Small amount of inventory at home for sampling and photography: 80 units at £12 = £960.
Total inventory: £103,960 across all locations. All of this represents inventory Fatima legally owns regardless of physical location. Business bank account: £18,700. Business PayPal: £4,200. Personal savings: £23,400.
Business debts: Outstanding payment to manufacturer for most recent shipment: £18,000 due in two weeks. Credit card used for business ads: £3,200 balance. Following majority position allowing immediate debt deduction: net wealth £103,960 + £18,700 + £4,200 + £23,400 - £18,000 - £3,200 = £129,060.
Zakat due: £129,060 × 0.025 = £3,226.50.
Key insight: Online sellers must count inventory regardless of physical location. Inventory stored with Amazon FBA, in third party warehouses, in international transit (if owned), and at home all count as zakatable business inventory. Fatima correctly includes all locations in her comprehensive calculation.
Islamic evidence
Quran and Sahih Hadith on Zakat for trade goods and business wealth
Authentic textual sources establishing the obligation of Zakat on business inventory.
Quran
Give Zakat from what We provided
Quran 2:267
Allah commands believers to give charity from good things earned and from what We brought forth from the earth. Business inventory represents goods earned through trade, making it subject to Zakat obligation when conditions are met.
Quran
Spend from what We provided
Quran 2:254
Allah instructs believers to spend from provision before the Day when there will be no trade. Business inventory is provision Allah granted through lawful commerce, and Zakat must be paid from it annually.
Quran
Purify wealth through charity
Quran 9:103
Taking charity from wealth purifies and blesses it. Business inventory is wealth that requires purification through Zakat, ensuring trade activities remain blessed and halal.
Quran
Rights of those in need
Quran 51:19
In the wealth of the righteous is a right for those who ask and those deprived. Business inventory exceeding nisab for one year contains this right that must be paid through Zakat.
Hadith
Zakat on articles of trade
Abu Dawud 1562
Samurah ibn Jundub reported that the Prophet (peace be upon him) ordered them to pay Zakat on articles of trade. This authentic hadith directly establishes that business inventory and trade goods are subject to Zakat obligation.
Hadith
Value trade goods on Zakat date
Abu Dawud 1573
The Prophet (peace be upon him) instructed that trade goods should be valued at their worth on the day Zakat becomes due. This hadith supports the market value approach for inventory valuation rather than historical cost.
Hadith
Zakat purifies wealth
Sahih Muslim 987
The Prophet (peace be upon him) taught that Zakat is a purification for wealth. Business owners must purify inventory and commercial wealth through annual Zakat to maintain blessed trade activities.
Hadith
Warning about withholding Zakat
Sahih al-Bukhari 1403
Severe warnings were given about those who possess zakatable wealth but do not pay Zakat. This applies equally to business inventory and other forms of wealth exceeding nisab.
Scholarly consensus on business inventory Zakat
All four schools of Islamic jurisprudence unanimously agree that trade goods and business inventory are zakatable. The Hanafi, Maliki, Shafi, and Hanbali schools all require Zakat on inventory held with intention to sell. Scholarly consensus establishes that inventory becomes zakatable at the moment of acquiring ownership with trade intent, that all forms of inventory including raw materials, work in progress, and finished goods are included, that valuation should be at market value on the Zakat date, and that the standard 2.5% rate applies. Muslim business owners throughout Islamic history have calculated and paid Zakat on their commercial inventory, and this obligation continues for all businesses today regardless of size, industry, or operational model. Understanding and implementing proper Zakat on business inventory is essential for purifying business wealth and fulfilling one of Islam's five pillars.
FAQ
Frequently asked questions about Zakat on business inventory
Direct answers to common questions Muslim business owners have about inventory Zakat.
Do I pay Zakat on all business inventory or only finished goods?▾
You pay Zakat on all inventory held for trade purposes, including raw materials, work in progress, and finished goods. Any inventory your business holds with the intention to sell must be included in Zakat calculation. Manufacturing businesses include raw materials that will become products, work in progress items being assembled, and completed inventory ready for sale. Wholesale and retail businesses include all stock purchased for resale.
Should I value business inventory at cost price or selling price for Zakat?▾
The majority scholarly position is to value business inventory at current wholesale or market value on your Zakat date, not retail price. If you are a wholesaler, use wholesale prices. If you are a retailer, scholars differ: some say use the price you would get selling to another wholesaler, others say use retail price minus typical discounts. The most cautious approach is to use current market value at which you could reasonably sell the inventory quickly.
Is there Zakat on inventory that has not sold for years or dead stock?▾
Yes, Zakat remains due on slow moving or dead stock as long as you still intend to sell it and it has some value. Even if inventory has been sitting unsold for multiple years, it is still trade goods held for business purposes. You value it at whatever realistic price you could sell it for on your Zakat date, which may be significantly below original cost. If inventory is completely worthless and unsellable, exclude it from Zakat calculation.
Do I pay Zakat on inventory I have not paid for yet or goods on credit?▾
Yes, inventory becomes zakatable when it enters your legal ownership, even if you have not yet paid the supplier. If you purchased inventory on 30 day payment terms or trade credit, the goods are yours and must be included in Zakat calculation. The corresponding accounts payable debt may reduce your overall zakatable wealth under some scholarly opinions, but the inventory itself is definitely zakatable.
How do I calculate Zakat on business inventory if I have thousands of items?▾
You must conduct a physical inventory count on or near your Zakat date, then multiply quantities by current values. For businesses with extensive inventory, use inventory management software to generate reports. Count physical stock, reconcile with system records, and value at current market prices. If exact counting is impractical for very large inventories, scholars permit reasonable estimation, but you should err on the side of caution by slightly overestimating rather than underestimating.
Is inventory purchased for business use rather than resale zakatable?▾
No. Inventory or supplies purchased for business use rather than resale are not zakatable. Office supplies, cleaning materials, packaging materials you use rather than sell, equipment, tools, and similar items are business assets for use, not trade goods. Only inventory you intend to sell to customers is zakatable. The distinction is intention at time of purchase.
Do manufacturing businesses pay Zakat on raw materials and components?▾
Yes, manufacturing businesses pay Zakat on raw materials, components, and work in progress because these will become finished products for sale. A furniture manufacturer pays Zakat on lumber, screws, fabric, and partially assembled chairs. A bakery pays Zakat on flour, sugar, packaging, and unbaked dough. All inventory in the production pipeline intended for eventual sale is zakatable trade goods.
How do seasonal businesses calculate Zakat on fluctuating inventory levels?▾
Seasonal businesses calculate Zakat on whatever inventory level exists on their annual Zakat date, even if inventory is abnormally high or low that specific day. A retail business that stocks up before Christmas calculates on actual inventory on Zakat date, whether that falls during peak season or slow season. This is why choosing a consistent Zakat date matters. Some scholars permit averaging inventory over the year, but the standard method is to value actual inventory on Zakat date.
Is there Zakat on consignment goods or inventory I am holding for others?▾
No Zakat on goods you hold on consignment for others, as you do not own them. Consignment inventory belongs to the consignor who pays Zakat on it. However, if you operate on a consignment model where you take ownership upon sale, include consignment inventory in your Zakat calculation. The key question is legal ownership. Inventory you legally own is zakatable even if physical possession is elsewhere, such as goods in a third party warehouse.
What is the Zakat rate on business inventory and when is it due?▾
The Zakat rate on business inventory is 2.5%, identical to Zakat on cash and other forms of wealth. Business inventory Zakat is due once annually when your total zakatable wealth including inventory exceeds nisab and remains above nisab for one complete lunar year. You calculate inventory Zakat on the same annual Zakat date you use for all other wealth, valuing inventory at market prices on that specific date.
Implementation
Practical tips for calculating business inventory Zakat
Make your annual inventory Zakat calculation accurate and manageable.
1. Schedule physical inventory near Zakat date
Conduct your annual physical inventory count within one week of your Zakat date. This ensures your Zakat calculation reflects actual current inventory levels. Use inventory management software to generate reports, conduct physical counts to verify accuracy, and reconcile discrepancies before finalizing values for Zakat calculation.
2. Use current market prices for valuation
Update your inventory values using current wholesale or market prices on your Zakat date, not historical purchase costs. Check supplier price lists, review recent purchase invoices, or research current market rates to ensure your inventory valuation reflects real current worth for accurate Zakat calculation.
3. Separate trade goods from business assets
Clearly distinguish inventory held for resale from equipment and supplies used in operations. Only trade goods are zakatable. Create separate accounts or categories in your bookkeeping system to track zakatable inventory separately from non zakatable business assets, making annual Zakat calculation straightforward.
4. Document your inventory Zakat calculation
Keep records of your annual inventory count, valuation method used, prices applied, and total zakatable inventory value. This documentation helps you maintain consistency year to year, provides reference for future calculations, and ensures you can explain your methodology if questions arise.
5. Include all inventory locations
Do not overlook inventory in multiple locations. Count inventory in your primary warehouse, retail locations, third party storage, goods in transit you own, consignment inventory you own (but not goods owned by others), and any other location where your business holds inventory. Our Zakat calculator helps you track all categories.
6. Value work in progress conservatively
For manufacturing businesses, value work in progress at cost of materials and production inputs invested to date. If precise costing is difficult, use material cost only as a conservative estimate. The goal is reasonable valuation that captures real value without excessive complexity in calculation methodology.
The fundamental principle for business inventory Zakat
All goods your business holds with intention to sell are zakatable trade inventory, regardless of form (raw materials, work in progress, finished products), location (your premises, third party warehouse, in transit), or payment status (fully paid or on credit). Value this inventory at current market prices on your annual Zakat date, combine with all other zakatable wealth, compare to nisab, and calculate 2.5% Zakat if conditions are met. This Islamic obligation purifies your business wealth and ensures your trade activities remain blessed and halal throughout the year.
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Related guides for business owners
Disclaimer: This guide provides general educational information about Zakat on business inventory based on widely accepted Islamic scholarly opinions and jurisprudential consensus from the four major schools of Islamic law. Individual business circumstances vary significantly based on business type (retail, wholesale, manufacturing, service, online, brick and mortar), inventory complexity (single location versus multiple warehouses, simple products versus complex manufacturing), ownership structures (sole proprietorship, partnership, corporation), accounting methods (cash versus accrual, FIFO versus LIFO), debt arrangements (trade credit, business loans, lines of credit), and specific operational factors. For questions about complex inventory valuation methods, international inventory across jurisdictions, consignment arrangements, drop shipping models, franchise inventory, inventory financing arrangements, or unique business models not addressed in this guide, consult qualified Islamic scholars who understand both Islamic commercial law and modern business accounting practices. This guide helps Muslim business owners understand fundamental principles of Zakat on business inventory using established Islamic jurisprudence that has governed trade goods for over 1400 years, now applied to contemporary business operations and inventory management systems.
About this Content
Written by the Zakat Finance editorial team. All content is based on authentic Islamic scholarship and is reviewed regularly to ensure accuracy. The content aims to provide guidance on Zakat calculation and does not replace advice from a qualified Islamic scholar.
Last updated: February 2026
Method note: We present common scholarly approaches to Zakat calculation, encouraging consultation with trusted scholars for personal cases.