GDP – indirect taxes + subsidies =

The GDP at factor cost is derived by the formula: GDP – indirect taxes + subsidies. Factor cost is the ’Price’ of the commodity from the producer’s side. GDP at factor cost is obtained by estimating the gross value of domestic output; determining the intermediate consumption, i.e., the cost of material, supplies, and services used to produce final goods or services; deducting intermediate consumption from gross value to obtain the net value of domestic output.

Net value added = Gross value of output – Value of intermediate consumption.

Gross value of output = Value of the total sales of goods and services + Value of changes in the inventories.

The sum of net value added in various economic activities is known as GDP at factor cost. GDP at factor cost plus indirect taxes less subsidies on products is GDP at producer price.