Discharging Zakaat with grocery vouchers
Question:-
1. I give my Zakaat money to a local grocery retailer, who in turn, issues me with vouchers equivalent to the value. Will my Zakaat be discharged to the total value of the vouchers, or, will the VAT be deducted from the vouchers and only the remainder be discharged as Zakaat? For example, I gave the retailer R10 000.00 Zakaat money to which he gave me 10 x R1000 vouchers which I had given to recipients. Will my Zakaat be discharged at R10 000 or, will only be R8 500 be discharged?
2. Does one calculate the market value of stock in trade including VAT, or excluding VAT, for Zakaat purposes?
Answer:-
1. If you give R10 000.00 to a particular businessman to discharge Zakaat on your behalf, then in essence, you are appointing that particular businessman as your representative to discharge Zakaat on your behalf. You then send ten people to the businessman (with coupons) to receive the Zakaat that is in his possession. The businessman permits each of them to purchase any goods or items from his store to the value of R1000.00.
The recipient of Zakaat is at liberty to purchase items (to the value of R1000.00) that are zero rated (in terms of VAT) such as milk, eggs, rice, beans, etc. in which case, they will not be paying any VAT to the revenue from their Zakaat allowance of R1000.00. They also have the choice of purchasing items that attract VAT such as sugar, flour, canned foods, etc. If the recipient of Zakaat decides to purchase items that attract VAT, then it was his or her choice to do so and will therefore, be liable to pay the VAT. Hence, the Zakaat of the contributor (which is R10 000.00 in our example) will be fully discharged, as the recipient of Zakaat was made the owner of the funds, and the recipient further used the funds according to his or her discretion.
2. Zakaat is calculated at the market value of the goods excluding the VAT, as the VAT does not belong to the shopkeeper. He is acting as a representative of the government to receive the VAT from the citizens of the country, and pay it over to the revenue. Hence, Zakaat will not be paid on the VAT. In conclusion, if one’s stock is worth R1 million including VAT, he will only pay Zakaat on R850 000.00.
ALLAH TA’ALA KNOWS BEST!
ANSWERED BY:
Mufti Mohammed Desai
Date: 20 Rajab 1444 / 11 February 2023