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Zakat On Industrial Production Of Aluminium Ingots
My husband has a business of producing aluminium ingots. He buys scrap metal and then in his factory transforms that into aluminium ingots (produces aluminium ingots) and then sells the ingots.
So I understand that the zakat on it will be 5% (as the production is with combination of capital + labour) but I want to know:
1. What will be the “nisaab” of zakat in this 👆particular case? I have heard in Ghamidi Sahab’s lectures stating that we take the income tax as nisaab but we live in Oman and I don’t think Oman takes any income tax from its residents. Please clarify
2. Will zakat be on the scrap metal as well or just the product as scrap metal is raw material (means of production) for the production of aluminium ingots?
3. 5% zakat will be on the profit of production after selling it? excluding its direct + indirect cost/expenses of production or including the direct and/or indirect cost/expenses of production? Like I want to understand that zakat will be on gross profit or net profit?
4. Also my husband is in 50% partnership with his brother so he will get his share of profit and then pay 5% zakat on it?
5. 5% zakat will be applicable on each production batch?
6. Is it permissible that we pay 5% zakat on total production of 3 months or 6 months, like every 3 months or 6 months? As it is difficult to calculate the profit/zakat of each production batch.
Apart from this I also want to ask that the zakat on inheritance will be 20% as I have not worked for it neither have I spent my capital on it?
Also please tell me that the zakat on my jewellery will be paid my me (I have no job or any source of income of my own) or it’s my husband’s responsibility?
And zakat on jewellery will include gold price + all the stones used in it?
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Zakat On Industrial Production Of Aluminium Ingots
updated 1 year ago
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Ghamidi sahab endorses a 5% zakat on production income if both capital and labor are used as inputs. Pls see page 348 of his book, Meezan. Please note that this is not a divinely ordained rate, but it is both reasonable and practical. So it should be followed consistently.
Nisab:
Whatever business, agricultural or industrial income is earned, is subject to zakat in accordance with principle laid down in verse 6:141.
6:141 He is the One Who initiated gardens; both trellised and untrellised; palm trees, and plants, all with different tastes; and olives and pomegranates, similar and not similar. Eat from its fruit when it blossoms and give its due on the day of harvest; and do not waste. He does not like the wasteful.
If we go by the principle or spirit of above verse, zakat should be calculated on net income earned (fruit of harvest which you can consume freely), after accounting for all business expenses, direct and indirect. Zakat should not be on production assets, also endorsed by Ghamidi sahab (Meezan 348). However, please note that the initial investment on the productive assets and the sources used for setting up the factory should have been zakat-paid as well, similar to the principle of taxation (if assets are made from tax paid income, you dont pay tax on assets again). Therefore, if zakat was not paid on the original investment in the factory, it can be paid now.
In the case of partnership, he is responsible only for his share of net profit/net income, obviously. So if his share from total net profit is 33% for example, then he should pay 5% of 33%.
Regarding questions 5 & 6, there is no hard and fast rule whether zakat should be calculated and distributed on each production cycle or a time period (quarterly or yearly etc). The verse 6:141 favours calculation per production cycle but that is in an agricultural context. In industrial context, time period wise calculation is totally fine, like quarterly or 6-monthly etc.
Please choose one frequency and then follow it consistently. So that the pattern is not unnecessarily changed in future whimsically or arbitrarily. It can be quarterly, 6-monthly, or yearly. Whatever you choose, the frequency should stay the same.
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Meezan, 5th edition (Dec 2009) by Javed Ahmed Ghamidi.
https://archive.org/details/Meezan_201902/page/n2/mode/1up
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Please post separate questions relating to Zakat on Inheritance and Zakat on Jewellery as per Ask Ghamidi’s Code of Conduct. The following response will only deal with the first question relating to industrial production of aluminium ingots.
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Zakat on industrial production should be 5% of industrial production on value addition only. Raw material, being a part of the means of production, is considered exempt from Zakat. Value addition will be considered actual production in this case.
For details on this point, Please refer to the videos of Ghamidi Sahab in the following thread:
Zakat on production is always on gross production and in case of industrial production, always on gross value addition. In rare circumstances, only those expenses can be deducted from gross production/gross receipt which are incidental in acquiring ownership of that particular form of means of production and/or are substantial expenses in maintaining/sustaining that particular form of means of production (which do not seeem to apply in this scenario).
If your state does not provide a nisab or there is no other basis available in the form of tax slabs to determine Nisab then you can use the standard nisab of 653 kg of Dates or equivalent value (Please see: Discussion 48837 • Reply 62082).
When production occurs, the zakat becomes due immediately on the gross amount (irrespective of the fact when one actually pays it). However, one can calculate it on yearly basis and can pay it in installments as well. After calculation of Zakat obligation, every partner in the business is responsible to pay their share of Zakat obligation.
Please feel free to ask a follow-up question in case of any confusion.
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