Sami Aryal, who works nearby, told ABC News four or five officers surrounded the florist amid the chaos.
He said he saw the florist, who has worked at the station for decades, covered with blood.
The man appeared lifeless after the shooting, with police crowding over him to offer first aid.
Mr Theoharas, 73, said he felt bad the 30-year-old was killed but defended the actions of police.
The business owner has given his harrowing account of the incident as police undertake a critical incident investigation into the fatal shooting.
According to a police statement released at 10.30pm, they were called to Eddy Avenue just before 6.45pm after reports of an armed robbery at a business near the entrance to Central Station. SBS journalist Andrea Booth also witnessed the incident, saying the scissor-wielding man told police "shoot me" shortly before the officers responded with three gunshots.
Police shot the man after a short confrontation, with graphic video shared on social media showing him dropping to the floor after four shots ring out.
"A critical incident investigation will now examine all circumstances surrounding the incident".
Three shots were then fired before the man went down.
Police expanded the crime scene to take in more of the concourse just before 9pm and forensic police are examining the scene.
As Mr Mokmool grabbed a pair of scissors, Mr Theoharas made a decision to run out of his shop and into the station for his own safety, he said.
Mr Huynh said he didn't believe needed to shoot him dead, and could have instead used pepper spray to disarm him. Two young commuters yelled out at police, "Why did you shoot him?" I think they have done the right thing.
NSW Police Assistant Commissioner Mark Walton said the critical incident team is now investigating the shooting which could be subject to an independent review.
"I'm guessing he got really paranoid at stuff".
Theoharas said he did not know his attacker and that he did not attempt to rob the store.
The area has been cordoned off and emergency services remain on scene.