The Tasmanian Government has flagged a substantial hit to its budget bottom line with GST revenue expected to be slashed.

Last year, Tasmania pocketed a $590 million windfall as a result of a favourable GST carve-up by the Commonwealth Grants Commission.

However, Treasurer Peter Gutwein told Parliament this morning that a revision to the formula used to divide the tax revenue would result in a ''substantial downward revision" in projects GST payments to the state.

Mr Gutwein said the hit to the bottom line would not impact on services.

"Because of the responsible and sensible approach the Government took in ensuring that we included a financial buffer, we will still be able to reinvest the dividend of putting the budget in a sustainable position, particularly in the core areas of health, education, and protecting the most vulnerable," he said.

He reaffirmed his commitment to return the budget to surplus in 2017.

Premier Will Hodgman told Parliament the downturn strengthened the case to reject a 10.5 per cent pay rise for politicians — a matter set to be debated later today.

His comments sparked a fiery response from the Opposition and the Greens benches, which proved to be the final straw for Speaker Elise Archer who suspended the sitting of Parliament due to the MPs' bad behaviour.

The Commonwealth Grants Commission will release its updated formula later this evening.

Treasury is finalising the state budget before it will be handed down next month.