All About Ad Valorem Tax - Meaning and Importance

Amongst the various types of taxes imposed by the State and Central governments, the Ad Valorem tax is a type of tax that is fairer in nature as it is imposed on the assessed value of the property under consideration.

What is Ad Valorem Tax?

Ad valorem tax is a type of tax that is levied based on the assessed value of an item or property rather than a fixed amount. The term Ad valorem tax derives its meaning from the Latin word "ad valorem," which means "according to value." In other words, the tax is calculated as a percentage of the value of the item or property being taxed.

How does Ad Valorem Tax Work?

The term Ad Valorem is a Latin word that literally means according to value. This type of tax is charged as per the assessed value of the property. This tax forms a major source of revenue for the Central and State governments.

The assessors chosen by the concerned authorities determine the value of the property and decide the tax rate applicable for further tax calculation.

What are the Types of Ad Valorem Tax?

There are various types of Ad Valorem tax. Below are a few of them -

Property Tax: Property tax is the tax levied on the commercial and personal properties owned by an individual. Every time an individual purchases a property, the state and municipal governments levy tax on the property.

Sales Tax: This type of tax is levied on every transaction. Sales tax is applicable when anyone buys a product or service. It is expressed in the form of a percentage of the value of the product/service.

Value Added Tax (VAT): VAT is the tax charged by the authorities on the services that help add value to the product/service. VAT is charged on the extra value added to the service or product.

What is the Applicability of Ad Valorem Tax?

Taxes levied on real estate are known as Ad Valorem Tax. Ad valorem taxes apply to different types of properties -

Land, buildings, and other property are also covered under this tax.

Ad valorem taxes can be used to make payment for renovations to other construction or property.

Automobiles such as vans, yachts, and trucks.

Ad Valorem Tax In MCA

A charge created by a company is required to be registered with the Registrar within 30 days of its creation in such form and on payment of such fees as may be prescribed.

In case company fails to register within 30 days than it is required to make an application to: Registrar for extension of time in form CHG-1 along with the additional fees ad Valorem Tax.

What is Form CHG-1?

All the companies have to file particulars for registration of charges created or modified within a specified period to the concerned Registrar of Companies. The charge can be created on various types of assets situated in or outside India and may be created in favor of lenders such as Banks or financial institutions are required to be filed in eForm CHG-1 to the concerned ROC in the case of an Indian Company andROC, Delhi in case of a foreign company.

Form CHG-1 is required to be filed pursuant to Sections 77, 78, and 79 and Section 384 and Rule 3 of the Companies Rules, 2014.

According to Section 77 of the Companies Act, 2013, it is the duty of every company to create a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder together with the instruments, if any, creating a such charge in such form, by paying the fees, with the Registrar within 30 days of its creation. Provided that the Registrar on an application by the company, allows such registration to be made (a)

in case of charges created before the commencement of the Companies (Amendment) Ordinance, 2019, within a period of 300 days of such creation. (b) in case of charges created on or after the commencement of the Companies (Amendment) Ordinance, 2019, within a period of 60 days of such creation, on payment of such additional fees as may be prescribed.

According to Section 78 of the Companies Act, 2013 When a company fails to register the charge within the period of 30 days referred to in subsection (1) of section 77, without prejudice to its liability in respect of any offense under this Chapter, the person in whose favor the charge is created may apply to the Registrar for registration of the charge along with the instrument

created for the charge, within such time and in such form and manner prescribed and the Registrar may, on such application, within a period of 14 days after giving notice to the

the company, unless the company itself registers the charge or shows sufficient cause why such the charge should not be registered, allow such registration on payment of a fee.

According to Section 79 of the Companies Act, 2013 The provisions of section 77 relating to the registration of charges shall apply to a company acquiring any property subject to a charge within the meaning of that section or any modification in the terms or conditions or the extent or operation of any charge registered under that section. According to Section 384 of the Companies Act,2013, The provisions of section 71 shall apply mutatis mutandis to a foreign company and the provisions of section 92 shall, subject to such exceptions, modifications, and adaptations as may be made therein by rules made under this Act, apply to a foreign company as they apply to a company incorporated in India.

According to Section 384 of the Companies Act,2013, The provisions of section 71 shall apply mutates mutandis to a foreign company and the provisions of section 92 shall, subject to such exceptions, modifications, and adaptations as may be made therein by rules made under this Act, apply to a foreign company as they apply to a company incorporated in India. The provisions of section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India, the books of account referred to in that section, with

respect to monies received and spent sales, and purchases made, and assets and liabilities, in the course of or in relation to its business in India. The provisions of Chapter VI shall apply mutatis mutandis to charges on properties that are created or acquired by any foreign company. The provisions of Chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.

According to Rules 3 of the Companies Rules,2014 for registration of charge as provided in subsection (1) of section 77, section 78, and section 79, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge in Form No.CHG-1(for other thanDebentures) or Form No.CHG-9 (for debentures including rectification), duly signed by the company and the charge holder shall be filed with the Registrar within a period of 30 days of the date of creation or modification of the charge along with the fee.

Due date of Form CHG-1

 The date for filing the form on the creation of a new charge/modification of charge is 30 days when the date of creation /modification of charge is on or after 2 November 2018.

Additional fees of Form CHG-1 

Charges created or modified before 02.11.2018 and allowed to be filed within a period of 300 days of such creation or six months from 02.11.2018 (i.e 1st May 2019), whichever is later:

Charges created or modified on or after 02.11.2018

 The following additional fees or ad valorem fees, as the case may be, shall be payable up to 31st July 2019, by all companies:

The following additional fees or ad valorem fees as the case may be, shall be payable with effect from 1st August, 2019:-