Key changes introduced by the Karnataka Shops and Commercial Establishments (Amendment) Act, 2026

Authors: Avik Biswas, Ivana Chatterjee, Apoorva Ravi

Introduction

The Government of Karnataka brought into effect the Karnataka Shops and Commercial Establishments (Amendment) Act, 2026 (“Amendment Act”) on 4 September 2026 thereby significantly amending the Karnataka Shops and Commercial Establishments Act, 1961 (“Karnataka S&E Act”). The Amendment Act broadly (i) simplifies compliance, through digital registration and registration certificates that remain valid permanently; (ii) imposes new obligations and prohibitions on employers, relating to service certificates and the retention of original documents; (iii) brings in certain changes with regard to women’s safety during night shifts; (iv) decriminalises certain offences and increases penalties, and introduces a revised compounding and appeal framework; and (v) aligns the Karnataka S&E Act with the Labour Codes.

In this context, we have examined the key changes introduced by the Amendment Act, which have been summarised below:

Exemption of certain establishments from the applicability of the Karnataka S&E Act

The Amendment Act now exempts establishments employing ten (10) or more workers from the applicability of the Karnataka S&E Act, provided such establishments are already registered under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSHWC Code”). The Amendment Act further clarifies that no separate registration will be required for godowns or storage facilities situated within 100 (one hundred) metres of the principal establishment.

It is important to note the following considerations with regard to the above provision:

• No working registration mechanism. The Karnataka OSHWC Rules have not yet been notified, so no registration mechanism is currently operating under the OSHWC Code in Karnataka. It is therefore difficult to see how the exemption is meant to work in practice.
• Deemed registration. Under the OSHWC Code, an establishment is “deemed” to be registered under the Code if:
  • it is registered under (i) any Central labour law, or (ii) any other law notified by the Central Government that applies to an establishment existing when the Code commenced; and
  • it furnishes its registration details to the registering officer within the prescribed time and in the prescribed form.

The Karnataka S&E Act is a state law. Registration under it does not, by itself, give rise to deemed registration under the OSHWC Code.

• Scope of the exemption is unclear. It is not clear whether the exemption covers only establishments expressly registered under the OSHWC Code, or also establishments with deemed registration.
• Compliance overlap continues. The exemption appears intended to prevent establishments having to comply with both the Karnataka S&E Act and the OSHWC Code. In its current form, the Amendment Act does not fully achieve this.

Registration requirements under the Act

The Amendment Act requires the registration authority to communicate its decision refusing registration within seven (7) days as against the erstwhile regime which provided a time period of 30 (thirty) days.

More significantly, a registration certificate issued under Section 4 will now remain valid until the closure or cessation of business of the establishment. Hence, the requirement to periodically renew registration certificates no longer exists under the new regime.

However, the sub-section which states that registration certificates will be valid for five years and must be renewed before expiry continues to exist and has not been omitted in light of the amendment and this creates an apparent inconsistency, providing simultaneously that registration certificates are perpetual and that they lapse every five (5) years unless renewed.

Digitisation of certain processes under the Karnataka S&E Act

The Amendment Act digitises the following processes with respect to establishments: the application for registration, issuance of registration certificates, payment of registration fees, renewal-related processes, and closure notifications. The continued reference to renewal-related processes is difficult to reconcile with perpetual registration.

Mandatory issuance of service certificates

The Amendment Act mandates that every employer must issue a service certificate to an employee governed by the Karnataka S&E Act within seven days from the date of receipt of such an application from such employee.

Prohibition on retention of employee documents

The Amendment Act prohibits employers from retaining an employee’s original educational certificates, experience certificates or any other original documents at the time of appointment or during the course of employment.

Even prior to the Amendment Act, courts had held that educational and experience certificates, being non-transferable, must remain with the employee to whom they were issued. Employers had no right to retain such certificates after the employee left service and were required to return them, failure to do so amounting to treating a non-transferable document as though it were transferable property. The Amendment Act now converts this position into a blanket legislative prohibition.

Omission of certain provisions pertaining to women’s night shift employment

The Amendment Act omits those provisions, which previously contained detailed safeguards for women employees working during night shifts. Broadly, the omitted provisions included requirements concerning –

• Obtaining bio-data and pre-employment screening of drivers, including outsourced drivers;
• Decision of pick-up/drop routes by a supervisory officer; change of drivers/routes/shifts only with prior knowledge of supervisory officers;
• Non-disclosure of women employees’ telephone numbers, email IDs, and addresses to unauthorised persons;
• Careful selection of routes to avoid first pick-up/last drop of women employees;
• Provision of security guards at the workplace and in night-shift vehicles when women employees are picked up first or dropped last;
• Random checking of vehicles on routes by designated supervisors;
• Control room/travel desk for monitoring movement of vehicles;
• Development of a mobile app for emergency contact by women employees.

Imposition of higher penalties

Contravention		Earlier provision		Amended provision
Contraventions under Sections 4, 5, 6, 6A, 7, 9, 10, 11, 12, 13, 15 and 16		Fine up to INR 1,000 (Rupees One Thousand) for a first offence; INR 2,000 (Rupees Two Thousand) for subsequent offences		Fine up to INR 3,000 (Rupees Three Thousand) for a first offence; INR 5,000 (Rupees Five Thousand) for subsequent offences
Contraventions under Sections 8, 17, 29 and 34		Fine up to INR 250 (Rupees Two Hundred and Fifty)		Fine up to INR 2,000 (Rupees Two Thousand)
Contraventions of Sections 24 and 25		Imprisonment of 3 months which may extend to 6 months and/or a fine up to INR 10,000		Fine of not less than INR 10,000 (Rupees Ten Thousand)
Obstruction of inspectors / non-compliance with lawful directions		Fine up to INR 500 (Rupees Five Hundred)		Fine up to INR 10,000 (Rupees Ten Thousand)
False claims of deemed registration / display of self-certification		Imprisonment of not less than 6 months and a fine up to INR 5,000		Fine up to INR 50,000

 

Compounding of offences

The provision pertaining to compounding of offences has been revised under the Amendment Act. All offences under the Karnataka S&E Act are now compoundable by the jurisdictional Labour Officer by way of collecting 50% of the prescribed fine in case of a first offence or 75% in case of a subsequent offence. However, an offence of the same nature committed by the same person more than twice within the same year is not compoundable.

Appeal mechanism

The Amendment Act introduces a new provision providing for an appeal mechanism whereby any person who is aggrieved by an order passed in relation to compounding of offences can appeal to the appellate authority notified by the Government within 30 days. An appeal will not be entertained unless the fine amount is deposited and appeals are required to be disposed of within 60 days in the prescribed manner.

Integration with the Labour Codes

The Amendment Act removes all references to the Payment of Wages Act, 1936 and the Workmen’s Compensation Act, 1923 and substitutes them with references to the Code on Wages, 2019 and the Code on Social Security, 2020 as applicable.

Concluding remarks

Broadly, the Amendment Act aims to make it easier to do business. It does so through digital registration, permanent registration certificates, faster decisions on registration and alignment with the Labour Codes.

However, several drafting inconsistencies and gaps in interpretation remain to be clarified, including:

• the conflict between permanent registration and five-year validity;
• the continued absence of the Karnataka OSHWC Rules, and the resulting uncertainty over how the exemption works;
• whether establishments with deemed registration under the OSHWC Code can use the exemption; and
• the absence of statutory guidance on the form and content of service certificates.

Key action points for employers and HR teams

Employers and HR teams should, among other things:

• Service certificates: set up a process to issue service certificates within seven (7) days of receiving an employee’s application;
• Onboarding documents: review onboarding practices so that no original educational certificates, experience certificates or other original documents of employees are retained, and return any originals currently held;
• Dual compliance: where the exemption is not available, continue to comply with both the Karnataka S&E Act and the OSHWC Code, particularly on working hours, overtime and leave entitlements;
• Night shift practices: review existing safety arrangements for women working night shifts in light of the omitted safeguards and any requirements that apply under other laws; and
• Regulatory tracking: monitor the notification of the Karnataka OSHWC Rules and any further clarifying rules or notifications on the gaps identified above.