Karnataka Shops & Commercial Establishments (Amendment) Act 2026: Key Details

Karnataka has amended its Shops and Commercial Establishments Act 1961, introducing changes to establishment registration, digital compliance, employee documentation, and the enforcement of statutory obligations. The Karnataka S&CE (Amendment) Act 2026 received the Governor’s assent on 3 September 2026 and was subsequently published in the Karnataka Gazette Extraordinary the next day. The Amendment Act came into force immediately.

These changes intend to reduce duplicate registration requirements and enable electronic and digital processes. It also introduces employee-related safeguards and rationalises penalties and enforcement procedures. For businesses operating in Karnataka, the changes warrant a review of registration status, employee documentation practices, and internal compliance procedures.

Key highlights of the Karnataka S&CE (Amendment) Act 2026

1. Conditional registration exemption: Establishments employing 10 or more workers and already registered under the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), are exempt from separate registration under the Karnataka Act
2. Digital compliance: Registration applications, certificate issuance, and fee payments are provided through electronic or digital modes
3. Registration validity: Registration remains valid until the establishment closes or ceases business
4. Employee documentation: Employers must issue service certificates within seven days of an employee’s application and cannot retain employees’ original documents
5. Revised enforcement framework: The amendment revises fines, introduces a structured compounding mechanism, and provides a statutory appeal process

Exemption from separate registration for certain establishments

The Amendment Act inserts a new clause (k) under Section 3(1) of the Karnataka S&CE Act 1961. Under this provision, an establishment employing 10 or more workers that is already registered under the OSH Code 2020, is exempt from separate registration under the Karnataka Act.

The amendment also provides that godowns or storage facilities located within 100 metres of the principal establishment do not require separate registration.

The exemption is conditional on the establishment meeting the specified worker threshold and already being registered under the OSH Code. Businesses should therefore verify their registration status and applicability before relying on this provision.

Digital registration and revised registration validity

The 2026 amendment revises Section 4 to enable electronic and digital registration. It allows applicants to submit registration applications, receive registration certificates, and pay applicable fees through digital channels.

The amendment also reduces the period under Section 4(3A) from 30 days to seven days. It extends the validity of registrations issued under Section 4 until the establishment closes or ceases operations, replacing the earlier fixed validity period.

Additionally, the amendment omits Section 4(6) and revises the penalty under Section 4(8). It replaces the earlier punishment of imprisonment and a fine of up to INR 5,000 with a fine of up to INR 50,000.

Digital notification to the inspector

Section 6 is amended to replace the requirement to notify the Inspector in writing with notification through electronic or digital mode.

This change aligns the relevant notification requirement with the amendment’s broader move toward digital compliance. Employers should review their processes for submitting statutory notifications and maintain appropriate records of electronic or digital submissions.

New employee documentation requirements

The Amendment Act introduces two new provisions, Sections 6-B and 6-C, concerning employee documentation and service records.

1. Service certificates within seven days

Under new Section 6-B, every employer must issue a service certificate to an employee within seven days of receiving an application from that employee. The certificate must be issued in the prescribed form.

Employers should establish a process to receive, track, and fulfil service certificate requests within the statutory timeframe.

2. Prohibition on retaining original employee documents

New Section 6-C prohibits employers from retaining an employee’s original educational certificates, experience certificates, or any other original documents at the time of appointment or during employment.

Businesses should review their recruitment and personnel-file practices to ensure that original employee documents are not retained. Where verification is necessary, employers should assess document-handling procedures that do not involve retaining originals.

Updates to wage and social security law references

The Amendment Act updates statutory references in Sections 21 and 22 of the principal Act.

Section 21 is amended to replace references to the Payment of Wages Act 1936, with the Code on Wages 2019. Section 22 is amended to replace the reference to the Workmen’s Compensation Act 1923, with the Code on Social Security 2020.

These amendments update the legislation referenced in the Karnataka Act. Employers should review their wage and employee-related compliance documentation in light of the revised statutory references.

ALSO READ: Karnataka Minimum Wage Overhaul: 2026 Rates, Zones & Compliance Mandates

Revised penalties for non-compliance

The Amendment Act revises penalty provisions, including changes to specified fines and the minimum fine for contraventions of Sections 24 and 25.

Provision	Change under the Karnataka S&CE (Amendment) Act 2026
Section 30(1)	Specified fines of INR 1,000 and INR 2,000 are revised to INR 3,000 and INR 5,000, respectively
Section 30(2)	The specified fine of INR 250 is increased to INR 2,000
Section 30(3)	Contraventions of Sections 24 and 25 attract a fine of not less than INR 10,000
Section 33	The specified fine of INR 500 is increased to INR 10,000

The amendment also revises Section 4(8), replacing the previous imprisonment provision and fine of up to INR 5,000 with a fine of up to INR 50,000.

These revisions make it important for employers to identify the provisions applicable to their establishments and review compliance practices to reduce the risk of contraventions.

Revised framework for compounding offences

The Karnataka S&CE Amendment Act 2026 substitutes Section 33-A with a revised compounding framework. Under the amended provision, the jurisdictional Labour Officer may compound offences punishable under the Act or its rules by collecting:

1. 50 per cent of the prescribed fine for the first offence
2. 75 per cent of the prescribed fine for the second or subsequent offence

An offence of the same nature committed by the same person more than twice within a period of one year cannot be compounded. The provision also states that no penalty may be imposed without giving the concerned person a reasonable opportunity of being heard.

The revised provision establishes a structured mechanism for compounding specified offences. Employers should note that the availability of compounding is subject to the statutory conditions and limits.

New statutory appeal mechanism

The Amendment Act inserts Section 33-B, which provides a right of appeal against an order passed under Section 33-A.

The key requirements are:

1. An appeal must be filed within 30 days from the date of receipt of the order
2. The fine ordered must be deposited before the appeal can be entertained
3. The appeal must be disposed of within 60 days
4. The appellate authority must be an officer not below the rank of Assistant Labour Commissioner

The appellate authority is to be notified by the state government, and appeals are to be disposed of in the prescribed manner.

Businesses should maintain records of enforcement orders and related correspondence to support timely review and any appeal, where warranted.

Karnataka-based employer compliance checklist

Businesses operating in Karnataka should consider the following actions in response to the Karnataka S&CE Amendment Act 2026:

• Verify whether the establishment qualifies for the OSH Code-based registration exemption
• Review the registration status and applicable digital registration procedures
• Update internal records to reflect registration validity until closure or cessation of business
• Review processes for electronic or digital notifications to the Inspector
• Implement a process to issue service certificates within seven days of employee applications
• Review recruitment and personnel-file practices to ensure original employee documents are not retained
• Identify the specific Section 25(1) clauses omitted and assess their operational relevance
• Review applicable penalty provisions and internal compliance controls
• Ensure relevant teams understand the compounding conditions and statutory appeal timelines

Conclusion

The Karnataka Shops and Commercial Establishments (Amendment) Act 2026 brings changes to registration, digital compliance, employee documentation, and enforcement. While qualifying establishments may benefit from the exemption from separate registration, employers remain responsible for determining which statutory requirements apply to their operations.

Businesses should review their registration position, update employee documentation procedures, and assess the impact of the revised penalty and appeal provisions. A structured compliance review can help employers align their processes with the amended legal framework and identify areas requiring further attention.