The perpetual war over GST revenue might finally be drawing to a close, with several state governments cautiously backing the Federal Government's plan to overhaul the system.

Key points: This is the biggest overhaul of GST since it was introduced in 2000

This is the biggest overhaul of GST since it was introduced in 2000 State governments largely on board but want to see more detail

State governments largely on board but want to see more detail Labor demanding Coalition explain how it will fund changes

The Coalition has promised to top up Western Australia's share of GST, which fell off a cliff in the wake of the state's mining boom.

After that it will introduce a new formula to calculate the way revenue is shared, pumping an additional $7 billion into the system to make sure no jurisdiction is worse off.

Eventually every state will get at least 75 cent back for every GST dollar raised.

Treasurer Scott Morrison said it was "making the pie bigger" in order to make sure state governments could deliver essential services.

Growing the pie

"If we left the pie at the same size, then obviously if there was a slightly smaller slice then people would be worse off, but when you make the pie bigger then obviously that slice is bigger," he said.

The Treasurer also promised he wouldn't raise taxes to pay for the overhaul, and said the money would come from the budget bottom line.

The decision has big ramifications for state governments, which will get almost $70 billion in GST revenue from the Commonwealth this year.

Successive West Australian governments have been pushing hard for the system to be changed, complaining their state had been short-changed.

Sorry, this video has expired WA Treasurer Ben Wyatt is hopeful his Labor colleagues will adopt the proposal

Western Australia's Treasurer, Ben Wyatt, said the new formula would protect his state from the boom-and-bust cycles of the mining industry.

"I think that's the value in the long-term reform is that in the event there is another super cycle in some commodity somewhere that you don't get that volatility in the revenue source," he said.

"It's not everything the state government wanted but what we've got here is something that can be achieved. This is something that can be landed … and delivered."

Tasmania depends heavily on GST revenue and has warned it cannot absorb any cuts to Commonwealth revenue.

Tasmanian Treasurer Peter Gutwein is cautiously optimistic. ( ABC News: David Hudspeth )

The state's Treasurer, Peter Gutwein, responded cautiously to Mr Morrison's announcement, but said Tasmania looked likely to benefit.

"It looks quite positive but we need to work our way through this," Mr Gutwein said.

The Government's main independent economic advisor, the Productivity Commission, had recommended the Coalition embrace a different model, carving up GST revenue on the basis of the states' average wealth.

But the Government rejected that idea — largely because it would have disadvantaged many smaller states and provoked a fierce political bunfight.

New South Wales Premier Gladys Berejiklian said the Productivity Commission's proposal would have seen more money flow to her state but seemed resigned to the Commonwealth's decision.

"This is a status-quo result," she told journalists in Sydney.

South Australian Premier Steven Marshall declared the Productivity Commission's recommendation would have been a disaster for his state, and praised the Commonwealth's decision.

"This is great news for South Australia," Mr Marshall said.

"Quite frankly, as a state, we were looking down the barrel of a gun. The Prime Minister has done the right thing by the people of South Australia."

The most sceptical response came from Queensland and Victoria.

Victoria's Acting Premier, James Merlino, said bureaucrats would be combing through the details of the proposal to make sure his state was treated fairly.

"We know that the devil will be in there," he said.

"We know that the Turnbull Government has a history of cutting vital services for Victorians and for people across the country. So we're going to make sure that this deal does what Scott Morrison claims it does."

Sorry, this video has expired Qld Premier Annastacia Palaszczuk wants to know 'where the money is coming from?'

Queensland Premier Annastacia Palaszczuk struck a similar tone.

"We need to see the modelling," she said.

"Where is that money coming from? It has to come from somewhere.

"I sat there and listened to Scott Morrison's press conference for 30 minutes. He did not detail at any stage where that money is coming from."

Shadow treasurer Chris Bowen said the states were "more than entitled" to doubt the Treasurer's promises.

"What guarantees does Scott Morrison give that this top-up funding will be locked in?" Mr Bowen said.

"And even more importantly, what guarantees does he give that it won't be clawed back through cutbacks to schools and hospitals?

"Scott Morrison may well be setting up the budget for another round of 2014-style budget cuts to fund the GST distribution model and to fund his big-business tax cuts. States and territories are entitled to be very cynical."