The Karnataka Shops and Commercial Establishments (Amendment) Act, 2026: What Business Owners Need to Know

Authored by Arundhathi G Nair

The practical implementation of the labour codes is getting clearer by the day, and Karnataka has just given business owners a concrete preview of what that clarity looks like on the ground. Through the Karnataka Shops and Commercial Establishments (Amendment) Act, 2026, notified on 3rd September 2026 (“Act”) and effective immediately, the Karnataka State Government has recalibrated the 1961 Act to align with the four central labour codes while also easing several long-standing compliance irritants for employers.

Registration gets faster and lighter

Establishments employing ten or more workers that are already registered under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”) are now exempt from separate registration under the Shops and Establishments Act altogether. It also clarifies that godowns or storage facilities located within 100 metres of the main establishment do not require separate registration. This reduces duplicate registration requirements for businesses operating across multiple locations. For everyone else, registration and renewal formalities have been pushed onto electronic or digital mode, and the Inspector’s window to object to a statement’s correctness has been compressed from thirty days to seven.

Perhaps the most consequential change is that registration, once granted, is now valid until the establishment actually closes or ceases business! The old cycle of periodic renewal is gone, along with the earlier six-month imprisonment threat for false self-certification, which is now punishable by fine alone, up to ₹10,000.

Two new employee facing obligations deserve attention

Sections 6B and 6C, inserted fresh into the Act, require every employer to issue a service certificate within seven days of an employee’s request. The Act also expressly prohibit retaining an employee’s original educational or experience certificates at any point during employment. Both provisions reflect protections recognised under the Labour Codes. Employers should therefore include these requirements in their onboarding and exit checklists. This is particularly important as the Act imposes penalties for violations of these provisions as well.

The codes are formally woven into the statute’s language

The amendments bring the statute’s terminology and regulatory framework in line with the new Labour Codes. In particular, references relating to wages and social security have been aligned with the Code on Wages, 2019 and the Code on Social Security, 2020, replacing references to the earlier labour laws. This ensures that the statute operates consistently with the definitions, rights and compliance framework introduced by the Labour Codes.

Night shift compliance for women employees has been meaningfully simplified

Section 25 retains its core safeguards such as written consent, secure transport with GPS tracking, rotation, adequate rest facilities, and employer funded crèche access, but the amendment omits the more granular operational mandates that had accumulated over the years, including driver background check protocols, route monitoring requirements, and mobile app-based emergency signalling. The substance of worker safety stays intact even though the compliance choreography around it does not.

Penalties have moved in two directions at once

Penalties under the Act have been significantly enhanced across various categories of offence. For instance, obstruction of an Inspector now attracts up to ₹10,000 rather than ₹500, while general contraventions under Section 30 may attract a fine of up to ₹5,000 for repeat offences.

At the same time, contraventions relating to child labour and night shift conditions, which previously carried the possibility of imprisonment, are now punishable by a fine alone, subject to a minimum fine of ₹10,000. The amendments therefore reflect a shift from imprisonment towards substantially higher monetary penalties in certain cases, thereby reducing the risk of incarceration while increasing the financial consequences of non-compliance.

Compounding and appeal have been formalised into a coherent procedure

The Act allows the jurisdictional Labour Officer to compound certain offences. The fine is 50% for a first offence and 75% for a repeat offence, subject to a limit of two offences per year and a mandatory hearing. A new provision under the Act also provides an appeal against the compounding order within 30 days, to be decided within 60 days by an officer not below the rank of Assistant Labour Commissioner. The fine must, however, be deposited before the appeal is entertained.

The Business Takeaway

• Lighter registration process: Digital registration, one-time validity and faster deemed approvals reduce the paperwork burden.
• OSH Code exemption: Establishments registered under the OSH Code with 10 or more workers receive a full carve-out from the registration requirements.
• Higher financial penalties: Fines have increased substantially across several provisions, making non-compliance more costly.
• New documentation duties: Businesses should ensure timely issuance of service certificates and should not retain employees’ original documents.
• Women working night shifts: Some procedural requirements may be reduced, but workplace safety conditions continue to apply.
• Wider scope for compounding: Compounding is now available for offences under Sections 24 and 25, providing an alternative to prosecution, subject to the prescribed conditions and payment of the applicable fine.

In short, there is less friction at the front end and sharper consequences at the back end. Businesses that update their registration status, documentation practices, and internal compliance calendars in the coming weeks will be the ones best placed to benefit from the lighter regime without being caught by the steeper one.