What does it mean by Business Vertical in GST?

Section 2(18) of CGST Act 2017 defines the term Business Vertical.

As per this section, Business Vertical means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals.

In other words, business vertical is a component of business which is:

• Distinguishable from other businesses of an entity because of different:
  • nature of goods or services or both
  • nature of Production process
  • type of customers
  • class of customers
  • distribution system
  • nature of regulatory environment
    

    ---

• One business component is different from another business component for its Risks and returns.

Examples:

One unit is doing business of food products and another is of garments. Both businesses are dealing in different nature of goods. Further, risks/returns of foods business are also varied from that of garments’ business.

One unit is manufacturing goods through handmade mode (without aid of any machinery). Another unit is manufacturing same goods through mechanization system (i.e. with the aid of Machinery).

One unit is dealing in garments only meant for children. Another unit is dealing in garments only meant for ladies. Hence, both units are dealing with different type of customers.

Where one unit deals with goods for Elite Class of customers only. And, another is dealing in goods for mediocre and small income group. This will be a good example of different class of customers.

Where a one unit is doing business through home delivery system and another is purely making sales through take away from shop or self -service by customer.

However, with the amendment of CGST Act 2017 through CGST Amendment act 2018 applicable w.e.f. 01.02.2019, concept of Business Vertical has been omitted from the act. Now, a person having multiple places of business in a state can apply for multiple registrations under GST even if the same goods or services or both are supplied from such multiple places.

Relevancy of business vertical : https://ca-sunilkumar.com/gst-case-branch-transfer-stock-transfers/