Led by former state BSP General Secretary Jarnail Nangal, the protestors assembled in local Gandhi chowk after shutting down their vends and took out a protest march in different bazaars in the area, police said.
They converged infront of the office of Mayor Arun Khosla in local Town Hall, they said.
Addressing protesters, Nangal accused the Mayor of creating division among vendors with his "carrot and stick" policy.
Nangal declared that the agitation would continue till the tax of Rs 1,000 to 3,000 on vendors was not withdrawn.
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Meanwhile, Mayor Arun Khosla, when contacted, accused Nangal of misleading vendors for cheap publicity.
He said that a very small section of vendors was siding with Nangal while majority of them were staying away from the politically-motivated agitation.
Khosla assured that the vendors would be charged as per their convenience.
However, BSP councillor Purnima Suman claimed that she had opposed the tax but her opposition was ignored by the majority councillors of the ruling SAD-BJP.