Prime Minister Malcolm Turnbull has pushed back against calls to remove GST from electricity bills, expressing concern about the multibillion-dollar impact on state and territory government budgets and observing other taxes could just be increased to compensate for the shortfall.

Parliamentary Budget Office costings for libertarian senator David Leyonhjelm show the idea would cost the states and territories - the recipients of GST revenue after it is collected by the federal government - a maximum of $2 billion.

Senator Leyonhjelm has argued the move, which could wipe hundreds of dollars off power bills, should be considered because power is an essential service just like water, which is exempt from GST.

The PBO advice projects household electricity prices would fall 9 per cent under the change and inflation would slow.