Karnataka Shops and Establishment Act, 1962: Scope, Registration, and Compliance

Posted by Written by Vasundhara Rastogi Reading Time: 3 minutes

India-Briefing-The Shops and Establishment Act Karnataka

Karnataka Shops and Establishment Act registration is a mandatory requirement for all companies, persons, and legal entities planning to set up a shop or commercial establishment in the state.

The Act is an important document for employers and their human resources (HR) departments in the state. The Act regulates commercial establishments in areas such as working hours prescribed for employees, annual leaves with wages, wages and compensation, employment of women and children, and other aspects.  

Businesses that have yet to set up in the state should review the document to understand key statutory requirements, while employers that have already set up in the state should review the Act to ensure their HR policies and handbook are compliant.

What businesses must comply

Commercial establishment means any commercial, trading, banking, insurance entity, an establishment, or administrative services wherein persons employed are mainly engaged in office work, a hotel, restaurant, a cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment.

The Act defines shops as a place where any trade or business is carried on or services are rendered to customers, including offices, storerooms, and godowns (warehouses). The term does not include shops attached to a factory where the persons employed fall within the scope of India’s Factories Act, 1948.

What businesses are exempt

The establishments that are exempt from the applicability of the Act include:

  • Federal, state government, or local authority offices;
  • Any industry or entity that provides power, light, or water to the public, or any water transport service, postal, railway survey, telephone or telegraph service, any system of public sanitation or conversancy;
  • Railway dining cars;
  • Establishments for the care or treatment of the mentally unfit, infirm or the sick;
  • The food corporation of India’s establishments;
  • The offices of legal and medical practitioners provided that they have not employed more than three persons;
  • A banking company’s offices;
  • Persons who are occupying the positions of management in any establishment;
  • Persons working on in positions which are inherently intermittent such as care takers , drivers, canvassers, or watch and ward staff; and
  • Persons who are directly engaged in complementary or preparatory work, like clearing and forwarding clerks who are responsible for the dispatch of the goods.

How to register under the Act

It is mandatory for all new shops or commercial establishments in Karnataka – whether employing more than one employee or note, to apply for registration under the Act within 30 days of commencement of business.

The application can be made online on e-Karmika which is the state government portal that provides an online facility for registration under the Act, and renewal or amendment of licenses. Once the application is made, the inspection and granting of registration takes about 15 days.

The shops and establishment registration is valid for a five-year period and is renewable after expiry.

The fee for registration depends on the number of workers employed in the business. For businesses with no employees, the fee is INR 250 (US $3.7), while for those employing more than 1000 workers, the registration fee is INR 50,000 (US $728). 

Documents required

For registration, the applicant must fill up details of the company in form-A, and submit it along with the following supporting documents:

  • Commercial address proof;
  • Identity proof and permanent account number (PAN) card copy of proprietor, partners or directors;
  • PAN copy of the entity;
  • Registration documents such as partnership deed or memorandum of association (MOA) of the company; and
  • Fee payment challans.

Key compliances for your business

Below, we provide some of the key aspects of the Karnataka Shops and Establishment Act, 1961.

Hours of operation

The Act provides for nine-hours a day or forty-eight hours a week work schedule for every employee in the state.

For those working overtime, it mandates employees to pay overtime wages at twice the rate of normal wages.

Employment of women and children

The Act prohibits companies from employing children under 14 years of age. It also prohibits night shift for women employees or young persons between the age of 14 to 18 years.

Information technology (IT) or biotech companies that require women employees to work in the night are required to obtain special permission from authorities.

Weekly holidays

It is mandatory for all establishments to remain closed for at least one day of the week and provide a day rest to its employees.

The weekly holiday provision, however, is not available to medical shops, general stores, theater, petrol bunks, lodges, hotels, clubs, hostel, and companies offering IT or biotechnology related services.

Annual leave with wages

Every employee working in an establishment in Karnataka is allowed to avail a leave with wages at the rate of one day for every twenty days of work performed. For young persons, the provision is more relaxed offering a leave with wages at the rate of one day for every fifteen days of work performed.

About Us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write india@dezshira.com for more support on doing business in India.