Capital Goods

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  • Topic: Term, Capital asset, Taxation
  • Pages : 2 (482 words )
  • Download(s) : 85
  • Published : February 2, 2013
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What is Capital Goods?
* Capital goods are the tools and machinaries used for producing consumer products. * They’re (usually) expensive, and they’re purchased for long-term use. * Raw materials are also needed for producing consumer goods (Biscuits, bread etc) but they are not capital goods. * Capital goods are also known as producer goods.

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Examples of Capital goods?
* Heavy equipment (such as excavators, forklifts, generators, metal-forming or metal-working machines, vehicles). boilers, storage tanks, evaporators| Chemical factory|
Mixer, grinders, refidgerators| Ice-cream factory|
Dumpsters, bulldozers etc big vehicles| Construction, mining industry.| * In short, factory equipment are capital goods because they’re used to produce customer goods. * But the equipment used in an office= not capital goods for example stapler, paper shredder, pen-holder, water-cooler table, chair etc. * Similarly, specialized air-conditioners installed in drug/ ice-cream factories to maintain uniform temperature during production= capital goods. * But air-conditioners installed in that factory owner’s cabin=not capitals goods. -------------------------------------------------

Why is Capital Goods important?
* If Capital goods are expensive, then companies cannot buy them=low production= low GDP. * If they buy expensive capital goods, they’ll keep final product’s MRP high to keep the profit margin same. * Hence, Government gives tax reliefs  on purchase/import of Capital goods by businessmen. * When you want to import Capital goods from a foreign country (e.g. USA ), you’ll need pay them in their own currency (dollars)? * So where to arrange for the dollars? Recall the FCNR account article Click ME -------------------------------------------------

What is capital gains?
* Capital gains= profit made by selling your...
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