As per the GST Act, if a business entity has multiple verticals of its business or business verticals within a single state or, say, a Union Territory, then it shall take multiple GST registrations for each of these verticals, subject to certain conditions and rules given in the Act.
Understanding business verticals, we can say that the same is a distinguishable component of an entity. It supplies goods or services, or both, that are individual or related goods or services, or both, that have different risks and returns from those of other business verticals belonging to the same entity. We can say that to obtain such different registrations under the same PAN within the same state, the business entity should consider the following points pertaining to its business:
– Nature of the goods and services which are being supplied
– The nature of the production process is followed
– The customers (type and class) dealt with by the entity
– Method of distribution adopted by the business
– Nature of the entity registration and the regulatory environment, like insurance, banking, or other public utilities.
It shall also be noted that for availing such different registrations for the business vertical in the same state, the composition scheme cannot be chosen due to the same reason that there is a business vertical registered already under the same PAN in the same state. However, if other business entities are paying tax or GST under the composition scheme, the same shall also be granted to the new business vertical.
Furthermore, any supply or transaction between business verticals should be invoiced, and a tax invoice provided for such supply, making the payment of GST applicable. This will also allow the other party to claim the input tax credit of the tax paid on such a transaction, despite it being within or between business verticals falling under the same ownership and PAN.
Therefore, we can say that for obtaining multiple registrations within the same state, a business entity or person should have business verticals operating under either all of them opting for a composition scheme or none of them opting for the composition scheme for tax payment.
