I believe this feature should definitely exist and would be an amazing improvement to WHMCS.

I don't think Inheritance is required actually, it could be better thought of to implement that feature, but that is not my concern regarding having Product/Service nesting available. So I'll just try to describe the situations where the simple nesting feature would be a must have:

VPS: I have VPS from different providers. Some have fundamentally different specs. So I create a Group named "Virtual Private Servers", and under it I can have "Starter instances" which have one category of VPS, then "Professional", with another set of products. But they are ALL Virtual Private Servers and should all be nested under Virtual Private Servers, while separated thereafter. Oh and Imagine you have Windows VPS and want to separate them altogether from the other offers, and have a nested group just called "Windows VPS"? And if I want to add "application VPS" there as well?

Reseller: Let's say you are reselling cPanel instances, and Plesk Instances. Are you really putting them all under ONE and the SAME category?
No, preferably I would have ONE Reseller group, which would have two nested groups: cPanel and Plesk.

There are many other options and examples I could provide but I imagine you get the gist. In none of these examples I have use for inheritance, so I apologise to the OP in this regard. Having this implemented the simple way is imo far more important than advanced features.

Thank you.