Modi’s Diwali Bonanza: Middle Class Wins as Car Prices Crash with New GST Reforms

India has launched a major round of GST reforms, dubbed as a “Diwali Bonanza” by Prime Minister Modi, introducing a simpler two-slab structure and making everyday items—including small cars—more affordable for common citizens.

Drawing from official announcements and news updates, here’s a clear explainer of this historic move, with tags and quotes from published headlines and your provided image content.

What Is the “Diwali Bonanza”?

The “Diwali Bonanza” refers to sweeping GST tax rate cuts and a restructured GST system timed for implementation before the 2025 Diwali festival, as promised by PM Modi in his Independence Day address.

The government has reduced the multiplicity of GST rates, aiming to boost consumption and ease inflation.

Key Features of the GST Reforms

Dual Slab System: GST is now divided mainly into two rates—5% and 18%, with a special 40% slab for luxury and “sin” goods, replacing the previous five-tier slabs (5%, 12%, 18%, 28%, plus cess).

Cheaper Essentials and Automobiles: Many essentials, including household items and small cars, have become more affordable:

  – GST on small cars dropped from 28% to 18%
  – GST on mid-size and luxury cars consolidated at 40%, but earlier compensation cess is removed.

Excerpt : 
“GST rate on all small cars has been reduced from 28% to 18%… big cars currently attract 28% GST … overall GST rate … set at 40%, with no compensation cess.”

Economic Impact and Motivation

Extra Money for Consumers: With reduced GST on essentials and cars, households will have more disposable income, boosting festival spending and economic momentum[2][3][6]. Experts estimate that these reforms may increase annual consumption by nearly ₹2 lakh crore and ease inflation by up to 60 basis points.

Ease of Doing Business: The reform’s simplification measures lower compliance burdens, resolving many previous classification and litigation issues for businesses and MSMEs.

Push for Electric Vehicles: Pure electric vehicles continue with a very low 5% GST, encouraging greener choices.

Voices from the Announcement

PM Modi: “The government intends to simplify the current GST structure and reduce the tax burden on everyday essentials… bringing the benefit to people at the earliest”.

Union Minister H.D. Kumaraswamy: “This is a transformational step… making lives easier and strengthening the vision of ‘Aatmanirbhar Bharat’”.

“The historic GST overhaul—just in time for the festive season—is set to boost domestic consumption and put more money in Indian households’ hands.”

The Diwali Bonanza reforms mark one of the biggest pro-consumer tax changes in years, demonstrating the Modi government’s focus on stimulating growth and making essentials, especially small cars, accessible to more Indians.

Citations:

Diwali bonanza for common man! Sweeping GST rate cuts … https://timesofindia.indiatimes.com/business/india-business/gst-council-meeting-live-updates-gst-rate-cut-reforms-fm-nirmala-sitharaman-new-gst-tax-rates-cheaper-costlier-list-impact/liveblog/123688578.cms

GST 2.0 by Diwali? Understanding PM Modi’s Tax Reform … https://www.sushilfinance.com/blogs/News-Views/GST-2-0-by-Diwali-

GST reforms Modi govt’s Diwali gift to nation https://www.mangalorean.com/gst-reforms-modi-govts-diwali-gift-to-nation-union-minister-kumaraswamy/

PM Modi’s GST Diwali bonanza timely, strategic move https://www.caalley.com/news-updates/indian-news/pm-modis-gst-diwali-bonanza-timely-strategic-move-experts

PM Modi Set Tone for Next-Generation GST Reforms https://www.newsonair.gov.in/minister-of-state-dr-l-murugan-pm-modi-set-tone-for-next-generation-gst-reforms/

GST Council clears two rate structure, bonanza for … https://www.businesstoday.in/latest/economy/story/gst-council-clears-two-rate-structure-bonanza-for-households-40-rate-on-sin-and-ultra-luxury-goods-492406-2025-09-03

India delivers tax bonanza ‘for common man’, new GST … https://www.hindustantimes.com/business/new-two-tier-gst-structure-to-kick-in-from-22-september-nirmala-sitharaman-101756917458027.html
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Small cars get relief after GST council decision – Moneycontrol https://www.moneycontrol.com/news/business/small-cars-get-relief-hybrids-costlier-after-gst-council-decision-13518201.html

GST on Cars in India 2025: Rates, Calculation, Impact and Exemptions https://cleartax.in/s/gst-on-cars

Govt delivers ‘GST Diwali bonanza’: Cheaper essentials … https://economictimes.com/news/economy/policy/govt-delivers-gst-diwali-bonanza-essentials-cheaper-big-relief-on-insurance-premiums/articleshow/123687935.cms

New GST Rates – Nirmala Sitharaman LIVE https://www.youtube.com/watch?v=MtW7rVfQgHQ

@aaditya for Newz Quest