Taking further to our discussion, we are continuing our discussion the definitions given under Section 2 of revised GST law and comparing the same with old model GST law to know the changes made in revised law:-
2(18): Business Vertical: The new definition reads as follows:
“business vertical” means a distinguishable component of an enterprise that is engaged in supplying an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business verticals;
Explanation: Factors that should be considered in determining whether products or services are related include:
- the nature of the products or services;
- the nature of the production processes;
- the type or class of customers for the products or services;
- the methods used to distribute the products or provide the services; and
- if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.
In the old draft, the definition was referred to be as provided in the AS 17 issued by the Institute of Chartered Accountants of India. As this particular AS is proposed to be scrapped, the definition was incorporated in the GST law itself to avoid any complexity in event of scraping of definition. But the definition itself seems to be a complicated definition to understand. A preliminary interpretation led to a belief that as like the current system of registration in excise and service tax where separate registration is taken for separate premise, the new regime will also provide a similar facility. It is expressly stated in the new law that the business verticals situated in the same State will have an option to avail single or separate registration for all such business verticals. A very important thing to note here is that the term used here is business vertical and not business premise. Thus the definition becomes critical altogether when it comes to registration.
A business segment is a part of the company that can be identified by the products it provides or by the services or geographical locations it operates in. In other words, it a single part of a business that can be distinctly separated from the company as a whole based on its customers, products, or market places. Management often divide companies into business segments to help determine which areas of the company are performing well and which areas need improvement.
Now if by the term business vertical, it means a segment of business then it would mean that different registration can be taken for different segments of the company. This interpretation also arises doubt that whether business premises are separate from business verticals and whether separate business premise will enjoy the benefit of separate registration or not. There is no specific provision in this regard and it is not clear that whether all the business verticals located in the same premises can be registered separately or not. However, if one looks into the practical aspect, it is found that for registration, details of constitution, name, bank account etc. is to be given by the assesses. This indicates that different business segments in the same premises may be separately registered only if the bank account is separate and separate accounting is being done for the said business as risks and returns are also required to be different. Moreover, practically assessees would avoid taking separate registration as taking separate registration will increase the administrative costs of the organization in the form of compliance as there are number of returns to be filed in GST. Accordingly, the option of taking separate registration for business segments within same premises appears to be a costly prospective for assessee.