Question

(a) The Government of India has recently announced the implication of Goods and Service Tax in India. Explain its likely impact on country's GDP.

(b) Find net value added at factor cost:

$\begin{array}{ccc}\text{Items}& \text{(Rs. in crores)}& \\ \left(i\right)& \text{Depreciation}& 700\\ \left(ii\right)& \text{Output produced (units)}& 900\\ \left(iii\right)& \text{Price per unit of output}& 40\\ \left(iv\right)& \text{Closing stock}& 1,000\\ \left(v\right)& \text{Opening stock}& 800\\ \left(vi\right)& \text{Sales tax}& 3,000\\ \left(vii\right)& \text{Intermediate consumption}& 20,000\\ \left(viii\right)& \text{Fuel and power}& 500\end{array}$

Answer 1

(a) Due to simplicity in the tax structure, it will become easy to handle the business, so production levels will increase and GDP will rise.

(b) Net value added at factor cost:
Sales = Output produced (units) $\times$ Price per unit of output
$900\times 40=36000$

Value of output = Sales + Change in stock = 36000 + (1000 - 800) = 36200

$GV{A}_{MP}$ = Value of output - Intermediate consumption = 36200 - 20000 = 16200

$NV{A}_{fc}=GV{A}_{mp}$ - Depreciation - NIT
= 16200 - 700 - (3000 - 0) = Rs. 12500 crores