NEW DELHI, Nov. 4 -- The Supreme Court on Wednesday reaffirmed states' power to impose an additional tax, surcharge or cess calculated on an existing sales tax, settling a legal question that had remained unresolved for nearly three decades. A seven-judge Constitution Bench upheld a 1974 judgment that recognized such levies as an exercise of states' taxation powers under the pre-GST regime.

A bench headed by Chief Justice Surya Kant held that an additional levy calculated as a percentage of the sales tax payable by a dealer amounts to an increase in the sales-tax rate. It therefore falls within Entry 54 of the State List, which empowered states to tax the sale or purchase of goods, other than inter-state sales, before the introduction of...