Stir in diced tomatoes, vegetable broth, basil, sugar, salt, and pepper. Bring to a boil, then reduce heat and let simmer for about 20 minutes.
In a mixing bowl, whisk together flour, baking powder, garlic powder, dried parsley, and a pinch of salt. Fold in cheddar cheese and gradually add milk until just combined.
Drop spoonfuls of the dumpling mixture into the simmering soup. Cover and let cook for 15-20 minutes, or until dumplings have puffed up and are cooked through.
Serve hot and enjoy your comforting bowl of tomato soup with cheddar bay dumplings!
Notes
For extra flavor, top with fresh basil or additional cheddar cheese. You can use fresh tomatoes instead of canned for a fresher taste.