Ad valorem is a Latin term meaning “according to value.”

Simple Meaning:

It refers to a tax or charge that is calculated as a percentage of the value of goods or property.

Examples:

Customs duty charged as 10% of the value of imported goods

Property tax based on the value of the property

GST charged as a percentage of the selling price

Example:

If a product worth ₹1,00,000 is subject to 12% ad valorem tax, the tax will be ₹12,000.

In short, ad valorem means a tax or fee based on the value of something.