As preparations for the Union Budget 2026–27 gather pace, India’s gems and jewellery industry has stepped up demands for wide-ranging tax and policy reforms to safeguard its global competitiveness amid mounting international challenges. 

Industry bodies have urged the government to rationalise customs duties, lower Goods and Services Tax (GST) rates, and modernise regulatory frameworks to support exports and domestic demand.

In a detailed pre-Budget memorandum submitted to Finance Minister Nirmala Sitharaman, the Gem and Jewellery Export Promotion Council (GJEPC) outlined a series of measures aimed at reducing operational costs and strengthening India’s position in the global diamond and jewellery value chain. The Council flagged concerns over rising global trade barriers, particularly higher tariffs in key markets such as the United States, shifting consumer preferences, and realignments in global supply chains.

According to GJEPC Chairman Kirit Bhansali, the global gems and jewellery sector is undergoing a period of structural change, making policy support critical for Indian exporters. He emphasised that reforms focused on cost efficiency, Special Economic Zone (SEZ) stability, and investment-friendly regulations could help the sector navigate current headwinds while laying the foundation for future growth.

One of the key concerns raised by the Council relates to the existing 4 per cent Safe Harbour tax, which it described as excessively high and a deterrent to international trade. The GJEPC has also called for rationalisation of import duties on cut and polished diamonds as well as coloured gemstones, arguing that current duty structures erode the competitiveness of Indian exporters in global markets.

In addition to tax relief, the Council has proposed amendments to the Customs Act, 1962, to align customs procedures with the needs of a fast-evolving, export-oriented industry. Suggested reforms include the introduction of risk-based customs clearance, artificial intelligence-enabled digital appraisals, and self-certification mechanisms for trusted exporters. These steps, the GJEPC said, would improve transparency, reduce clearance times, and enhance ease of doing business.

Parallelly, the All India Gem and Jewellery Domestic Council (GJC) has made its own representation to the government, focusing largely on GST rationalisation, hallmarking norms, and direct tax reforms. The GJC has proposed reducing GST on gold and silver jewellery to 1.25 per cent from the current 3 per cent, arguing that a lower rate would restore tax proportionality, ease financial pressure on consumers, and encourage a broader base of compliant transactions.

The domestic industry body has also suggested exempting capital gains tax on the exchange of hallmarked jewellery, provided the sale proceeds are immediately reinvested in new jewellery. According to the GJC, such a move would ensure continuity of asset holding while discouraging unaccounted transactions in the sector.

Another significant demand relates to the long-pending Tourist GST Refund scheme. The GJC has urged the government to operationalise the scheme at the earliest by notifying the necessary rules and establishing digital claim and verification systems at major international airports. It has proposed launching a pilot phase at airports in Delhi, Mumbai, and Bengaluru, citing high volumes of foreign tourist arrivals and jewellery sales at these locations.

Industry representatives have pointed out that foreign tourists currently face a price disadvantage when purchasing jewellery in India, as taxes are embedded in retail prices without an effective refund mechanism. In contrast, competing destinations such as the UAE and Singapore offer streamlined airport-based GST refund systems, often influencing tourists to defer purchases or shop overseas. The absence of a functional refund framework, the GJC noted, results in lost retail opportunities despite India’s strong craftsmanship and manufacturing capabilities.

With the Union Budget 2026 expected to address both growth and competitiveness concerns, the gems and jewellery sector is hopeful that targeted tax relief and procedural reforms will help it withstand global pressures and unlock the next phase of expansion in both exports and domestic consumption.

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