Prime Minister Narendra Modi's Independence Day speech from the ramparts of Red Fort apparently sets the stage for Goods and Services Tax (GST) reforms, a forerunner programme of the government launched in 2017.

Stressing on the GST overhaul, the Prime Minister hinted towards a tax relief on the upcoming Diwali, calling it ‘Diwali Dhamaka.’

The term ‘Diwali Dhamaka’ is expected to bring rationalisation of the GST rate for the automobile sector, which is good news for troubled carmakers and auto sector enthusiasts.

Reportedly, the government has proposed lowering of GST on small petrol and diesel cars and two-wheelers to 18 percent from the current 28 per cent, which can be a major relief for manufacturers and auto enthusiasts.

Moreover, GST on tractors is also expected to be reduced to 5 per cent from the current 12 percent.

Small cars refer to a category of vehicles that are small, lightweight, and fuel-efficient models designed for urban commuting and navigating narrow streets. These cars are losing their popularity as consumers are steadily shifting to SUVs.

This expected GST reduction rejuvenates the troubled small and diesel car market segment in India. The GST cut will make these vehicles more affordable to people, and manufacturers will also set up their plants by recognising the sales opportunity.

As the news of expected GST rate cuts sparked , the shares of major car manufacturers witnessed a spike. Shares of Maruti Suzuki rose about 9 per cent today.

Moreover, other prominent names, including Mahindra & Mahindra and motorbike manufacturers Hero MotoCorp and Bajaj Auto, also performed well.

The proposal of GST rate rationaliation is first to be reviewed by the Group of Ministers (GoM), and then it goes for final approval to the GST Council.

Goods and Services Tax (GST) Council is a constitutional body that oversees and makes recommendations on issues related to the implementation of GST in India.