US Tariffs, Weak Demand Hit Gems and Jewellery Exports; GJEPC Seeks Duty Relief Ahead of Budget

India’s gems and jewellery sector is operating under sustained pressure as geopolitical tensions rise and consumer demand softens across key overseas markets. Valued at $28.7bn in FY25, the industry is already feeling the impact of steep 50% tariffs imposed by the United States.

For decades, the US sat at the heart of India’s gems and jewellery export strategy — its largest market, the price setter for polished diamonds and the anchor for volume-led growth. That dependence, however, is now easing, not by design but by compulsion.

Between April and November 2025, India’s g&j exports to the US fell sharply by 43.8%, dropping from $6.29bn to $3.54bn.

Finance Minister Nirmala Sitharaman will present the Union Budget for FY27 on February 1. As the sector works to diversify exports and tap new markets, the Gem & Jewellery Export Promotion Council (GJEPC), the apex body representing the sector, has urged the government to consider targeted duty rationalisation and procedural reforms that will help Indian manufacturers stay cost-competitive.

"With high U.S. tariffs, evolving consumer preferences, and shifting global supply chains, it is imperative that India maintains its competitive edge. Our pre-Budget proposals are focused on making Indian exports more cost-efficient, strengthening SEZ operations, and improving policy frameworks that encourage investment and skill development," said Kirit Bhansali, Chairman, GJEPC.

Key Recommendations

India cuts and polishes nearly 90% of the world’s rough diamonds, but it continues to lack a global trading hub comparable to Antwerp and Dubai. The current 4% Safe Harbour tax is also considered too high and deters international trading activity.

To address this, GJEPC has recommended the introduction of a liberalised and predictable taxation regime on foreign mining companies (FMCs) operating in Special Notified Zones (SNZs). It also proposed a similar model like Belgium’s “Carat Tax”, positioning India as a diamond trading and value discovery centre.

With exporters facing pressure from beneficiation policies, weak demand and emerging rival centres in Africa and Southeast Asia, GJEPC has urged the government to rationalise import duties on cut and polished diamonds and coloured gemstones. Under current rules, semi-processed diamonds imported from mining countries are treated as cut and polished stones, attracting a 5% Basic Customs Duty that erodes export margins.

A parallel issue exists in coloured gemstones, where export restrictions and high duties in producing countries force Indian jewellers to import finished stones. The prevailing 5% duty adds to costs and weakens India’s position against competitors such as Thailand and China. The Council has proposed reducing duties on cut and polished diamonds and gemstones to 2.5%, and removing duties on rough gemstones altogether to sustain manufacturing, employment and exports.

Furthermore, to address volatility in precious metal prices, GJEPC has recommended replacing the fixed-rate duty drawback system for gold and silver jewellery with an ad-valorem mechanism. The current system reimburses only about 75–80% of duties paid, leading to recurring losses.

The Council has also sought the inclusion of platinum jewellery and gold articles under the Duty Drawback Scheme. Platinum jewellery exports have grown nearly 17-fold over the past five years, driven largely by SEZ units that benefit from duty exemptions. Extending similar benefits to Domestic Tariff Area exporters would create parity, encourage diversification and support India’s ambition to become a global manufacturing hub for platinum and high-end gold jewellery.

To position India as a global luxury shopping destination, GJEPC has proposed a comprehensive tax refund scheme for foreign tourists. Currently, international buyers can claim refunds only on GST, despite paying Basic Customs Duty and Agriculture Infrastructure and Development Cess. A refund mechanism covering all applicable taxes — similar to those in Dubai and Singapore — would make Indian jewellery more price-competitive, boost tourism-linked retail and strengthen Brand India.

To help exporters manage demand cycles, GJEPC has sought greater flexibility for SEZ units. Key proposals include allowing reverse job work for domestic orders during export slowdowns, permitting clearance of unsold inventory into the Domestic Tariff Area on payment of duty, and introducing a ‘Bill to Ship to’ mechanism to simplify logistics. These measures aim to prevent idle capacity, protect skilled jobs and improve business resilience.

The Council has also called for amendments to the Customs Act, 1962, to align procedures with the needs of an export-driven sector. Suggested reforms include risk-based clearances, AI-enabled digital appraisals and self-certification for trusted exporters. Uniform Standard Operating Procedures across ports for imports and exports have been proposed to cut delays and improve ease of doing business.

Finally, GJEPC has urged the extension of duty exemption on imported lab-grown diamond seeds beyond March 2026. The sector remains dependent on high-quality imported seeds to ensure consistent output. Continuing the exemption, the Council argues, is critical to maintaining cost competitiveness, boosting exports, expanding domestic production and preserving India’s leadership in the fast-growing global LGD market.