What is the nature of income earned  / expended in instruments like  repos and reverse repos and is such income taxable under GST?

Section 45U(c) of the RBI Act, 1934 defines ‘repos’ as an instrument for  borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed. Section 45U (d) of the RBI Act, 1934 defines ‘reverse repos’ as an instrument for lending funds by buying securities with an  agreement to re-sell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent. Repos and reverse repos are financial instruments of short term call money
market that are normally used by banks to borrow from or lend money to RBI.

The margins, called the repo rate or reverse repo rate, in such transactions are  nothing but interest charged for lending or borrowing of money. Thus they have the characteristics of loans and deposits for interest and are accordingly exempt from GST [serial no. 27 of the table of notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017, as amended].

Q 38 of GST FAQs on Financial Services Sector published by CBIC