With the Union Budget just days away, gemstone and jewellery traders in Surat are looking to the Centre for policy support as rising tariffs and taxes weigh heavily on the sector.

Industry players say business sentiment has been hit by the steep 50 per cent tariff imposed by the Trump administration on jewellery exports, which has increased costs and reduced competitiveness in key overseas markets. Traders argue that without corrective measures, the impact could further strain one of India’s largest export-driven industries.

To revive growth, the sector is urging the government to pursue more Free Trade Agreements (FTAs) that could help open new export destinations and offset losses in traditional markets. Experts also point to the need for restoring duty drawback benefits on precious metals, which they say would ease cost pressures for exporters.

Another major demand relates to the taxation of foreign mining and diamond trading companies operating in Special Notified Zones, including the Surat Diamond Bourse area. Currently, these firms are taxed under a safe harbour framework that assumes a minimum profit margin of 4 per cent, requiring companies to pay tax on notional profits regardless of their actual performance.

Industry representatives argue that margins in rough diamond trading are far thinner, making the current tax regime commercially unviable for foreign firms and reducing India’s attractiveness as a global diamond trading hub.

As an alternative, traders are seeking the adoption of a Belgium-style “Carat Tax” system, under which diamond traders are taxed using a standardised formula linked to turnover rather than volatile profits. They believe such a move would improve transparency, encourage foreign participation and strengthen the sector’s overall competitiveness.

The Union Budget will be presented on February 1 by Union Finance Minister Nirmala Sitharaman, and Surat's jewellers and gem dealers are optimistic that specific relief measures will be announced to help the sector.