Could the rash on stomach be related to diabetes?

Probably not: Probably not if your sugar is well controlled and the rash is not in a skin fold like an overhanging belly or under the breasts or arm pits.

Many possibilities: There are many things that could cause a skin rash. Several types of inflammatory conditions of the skin, allergic reactions, sun exposure, insect bites, and sometimes bacterial, viral or fungal infections can cause rashes on the skin. Have it evaluated by a professional and get the appropriate treatment.