Labour Theory of Value Addition, Surplus Value and GST

Labour Theory of Value Addition, Surplus Value and GST On Wednesday 11 September 2024, during FM Nirmala Sitaraman’s interactive session with MSMEs, President of Tamil Nadu Hoteliers’ Association Mr D Srinivasan of Annapurna chain commented ‘Some items get Input Tax Credit while some don't ’ and requested the minister ‘Please make GST uniform for all food items.’ She did not respond during the session but on Thursday 12 September in a press conference she defended the rate regime saying ‘How can value added product and a raw product be taxed uniformly’. Soon after her press conference, a video, through twitter handle of a BJP member, surfaced showing Mr Srinivasan in a private meeting with Nirmala Sitaraman apologising for his remark that GST causes confusion. The video started a war of words between opposition and ruling party. The opposition is condemning the minister for humiliating Mr Srinivasan first by compelling him to apologise and then making public whatever transpired in the private meeting, and ruling party claiming there was no coercion and Mr Srinivasan apologised on his own volition. The debate obfuscates, behind the innocuous appearing remarks, by both Mr Srinivasan and Mrs Nirmala Sitaraman regarding value addition and GST, the fundamental contradiction of political economy of class divided society - social creation and individual appropriation of surplus. Those who study Marxism as science of man as well as natural science know very well that Marxism is capable of demonstrating ad hominem as it grasps every contradiction from its root. Unfortunately most of the proclaimed Marxists neither understand the fundamentals of creation of value, and of surplus value, nor consider it important to understand it. How misconceived our well recognised Marxist economists are, can be seen from Prof Patnayak’s statement. "The Labour Theory of Value, in my view, is concerned basically with the relative exchange ratio between the money commodity on the one hand and the world of non-money commodities, taken together, on the other hand." (A Restatement of the Labour Theory of Value, Prabhat Patnayak, Working Paper No. 2014/01, presented at CESP, JNU.) The wealth of those societies in which the capitalist mode of production prevails, presents itself as "an immense accumulation of commodities" (Sum total of their value), its unit being a single commodity - money. Our investigation must therefore begin with the analysis of a commodity and its value. A commodity appears, at first sight, a very trivial thing, and easily understood. However its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties. One thing is obvious that value of any commodity is intangible and equal values can be exchanged only when they are manifested as something tangible either in the form of commodities as in barter, or any other thing, a unit of which is acceptable to all sellers and buyers in general as a standard of value in exchange, without any ambiguity, and this thing came to be known as ‘Money’. In initial stage of development some universally useful product, and later precious metals, came to represent money (Commodity money). In the developed market economy, within the domain of a state, coins minted or paper currency printed by the state came to be accepted as money (Fiat money). Since then value of every commodity is expressed in terms of money, and price expressed in terms of money has become synonymous to value. Because of this obfuscation people are unable to understand the real character of value and, that how it is created and how profit is generated. (http://marxdarshan.blogspot.com/2019/04/labour-theory-of-value-and-surplus-value.html). It is not easy to understand the difference between a product and a commodity because generally, due to idealist thinking, people are not able to connect the concrete form of material things with any abstract idea. For them being and consciousness are completely unrelated things. How can the same object be two different objects at the same time, despite there being no change in the shape or colour of the object produced? Does calling an object a commodity instead of a product change its character? No, the structure and nature of the object remains the same, but because its reflection in the human brain depends on the mental state of a person, the same object can be seen in different forms by different people at the same time, and a person can see an object in different forms at different times, depending upon his state of mind. In the exchange process two different people with different expectations and two different products take part at the same time. (उत्पाद तथा जिंस में क्या फर्क है ये आसान नहीं है क्योंकि आम तौर पर, भाववादी चिंतन के कारण लोग भौतिक चीजों के मूर्त रूप को किसी अमूर्त विचार के साथ जोड़ कर नहीं देख पाते हैं। उनके लिए चेतना तथा अस्तित्व पूरी तरह असंबद्ध चीज़ें हैं। पैदा की गयी वस्तु के आकार, रंग-रूप में किसी भी परिवर्तन के न होने के बावजूद, एक ही वस्तु एक ही समय पर दो अलग अलग वस्तुएँ कैसे हो सकती है? क्या किसी वस्तु को उत्पाद की जगह जिंस कहने से वस्तु का चरित्र बदल जाता है? नहीं वस्तु की संरचना और प्रकृति तो वही रहती है पर, मानव मस्तिष्क में उसका प्रतिबिंब व्यक्ति की मन:स्थिति पर निर्भर होने के कारण, एक ही वस्तु को एक ही समय पर अलग-अलग व्यक्ति अलग-अलग रूप में देख सकते हैं, और एक ही व्यक्ति एक ही वस्तु को अलग-अलग समय पर, मन:स्थिति के अनुरूप, अलग-अलग रूप में देख सकता है। विनिमय की प्रक्रिया में एक ही समय पर दो अलग-अलग व्यक्ति अलग अलग अपेक्षाओं के साथ, और दो अलग-अलग उत्पाद हिस्सा ले रहे होते हैं। http://marx-darshan.blogspot.com/2015/12/blog-post.html) The first step made by an object of utility towards acquiring exchange-value or value is when it forms a non-use-value for its owner, and that happens when it forms a superfluous portion of some article required for his immediate wants. With their highly developed physiology humans are capable of producing more than what they need to consume to perpetuate their lives and regenerate their labour power. Thus they produce surplus. Through learning process they continuously increase their productivity and the production of surplus. Immense wealth visible all around is accumulation of this surplus for centuries. Objects in themselves are external to man, and consequently alienable by him. In order that this alienation may be reciprocal, it is only necessary for men, by a tacit understanding, to treat each other as private owners of those alienable objects, and by implication as independent individuals. Meantime the need for foreign objects of utility gradually establishes itself as exchange. The constant repetition of exchange makes it a normal social act. In the course of time, therefore, some portion at least of the products of labour must be produced with a special view to exchange and not for the consumption by the worker himself. From that moment the distinction becomes firmly established between the utility of a product for the purposes of consumption (Consumable), and its utility for the purposes of exchange (Commodity). Its use-value becomes distinguished from its exchange-value or simply value. On the other hand, the quantitative proportion in which the articles are exchangeable, becomes dependent on their production itself. Custom stamps them as values with definite magnitudes. Production becomes machine based rather than skill based and uniform socially necessary labour or average labour power multiplied by necessary time needed to produce becomes measure of magnitude of labour congealed in the product. Thus a commodity is, in the first place, an object outside us, and a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. Second it’s ownership must be clear from the moment it is born or produced, so that it can be exchanged or in other words it acquires exchange-value or simply value. The mode of production in which a product takes the form of a commodity, or is produced directly for exchange, is the most general and most embryonic form of bourgeois production. Now a product of human labour acquires two distinct values, one the use-value as an object for consumption to satisfy want of the user (not the producer), and the other the exchange-value as a commodity for exchange with another object of equal exchange-value irrespective of its use-value. In fully developed market economy a product of human labour acquires a twofold value because of twofold character of labour which is in accordance with the fundamental dialectical law of nature - quantitative change leading to qualitative change. Large number of same amount of aliquot parts of uniform labour can produce qualitatively different wholes. The secret of the expression of value, namely, that all kinds of labour are equal and equivalent, because, and so far as they are human labour in general, cannot be deciphered, until the notion of human equality has already acquired the fixity of a popular prejudice. This, however, is possible only in a society in which the great mass of the produce of labour takes the form of commodities, in which, consequently, the dominant relation between man and man, is that of owners of commodities. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom. However varied the useful kinds of labour, or productive activities, may be, it is a physiological fact, that they are functions of the human organism, and that each such function, whatever may be its nature or form, is essentially the expenditure of human brain, nerves, muscles, &c. Secondly, with regard to that which forms the ground-work for the quantitative determination of value, namely, the duration of that expenditure, or the quantity of labour, it is quite clear that there is a palpable difference between its quantity and quality. In all states of society, the labour time that it costs to produce the means of subsistence, must necessarily be an object of interest to mankind, though not of equal interest in different stages of development. And lastly, from the moment that men in any way work for one another, their labour assumes a social form. Every producer of a commodity is a consumer of various other commodities. In primitive societies individual consumers and producers would barter their products of interest. Proportion of the quantities of the two products in barter were decided, consciously on the basis of their respective utility but subconsciously on the basis of respective time spent on their production. Let us consider exchange of two commodities ‘A’ and ‘B’. To induce exchange, owner of ‘A’ must see use-value in commodity ‘B’, and B must see use-value in commodity ‘A’. At the same time A sees exchange-value only in his commodity ‘A’, and B sees exchange-value only in his commodity ‘B’. The respective commodities are in control of their owners who consciously decide the exchange keeping in mind the use-value; exchange-value and surplus-value are of no consequence. Law of dialectical relationship between being and consciousness shows how slave-master relationships between being and consciousness is reversed as market economy grows. Now circulation of commodity controls market consciousness. Behaviour of middleman-owners of commodity at different stages of circulation process is determined by the extraction of surplus value at each stage of circulation. Every commodity has a buyer and a seller. On seller’s end the commodity has its exchange-value or simply value, while on the buyer’s end it has use-value and the difference is surplus-value. On the starting point of a commodity is the worker providing labour power and is interested in value and sells his commodity to buy goods for consumption. At the end point is a consumer who sees use-value and buys to consume. Difference between the value at starting point, and the use-value at the end point is surplus-value (profit) which is extracted by various actors facilitating the circulation of commodity from production till consumption. State is one actor which extracts its share of surplus in the name of various direct and indirect taxes. Cost of production or value of a commodity depends upon material conditions, but use-value or equivalent value of the commodity depends upon the fancy of the consumer, which is different for different classes. Thus surplus-value produced is different for different classes of consumers. White goods produce more surplus value than what basic goods produce. Science and technology has developed productivity to that level that surplus produced is one and half times of input cost (Value), 60% of sale price. In Luxury goods and services it can be still higher. There are four major players sharing the surplus-value, each getting approximately 15%. Financier providing capital, bourgeois the owner of the assets, capitalist the one managing the whole process of circulation and government. GST higher than 15% disturbs the balance between various stakeholders and is not conducive to the growth of economy. GST on goods essential for survival and honourable living must be at lower rate and on white goods may be at higher rates. To keep the knowledge about surplus-value under cover is in the interest of propertied class and to bring it in public domain is in the interest of proletariat. Suresh Srivastava 18 September, 2025