Meaning of ‘Value added’ :
In the above illustration, the ‘value’ of inputs is Rs 110, while ‘value’ of output is Rs 150. Thus, the manufacturer has made ‘value addition’ of Rs 40 to the product.
Simply put, ‘value added’ is the gross difference between selling price and the purchase price in case of traded goods, and gross difference between selling price of final product and purchase price of inputs, in case of manufactured goods.