COMPETITIVE DISADVANTAGE

It noted that the health sector, for example, "has significant government involvement through direct subsidy and regulation" with many charges provided either free or with a co-payment a "fraction of the total cost of providing the service".

Therefore, applying the GST to healthcare "would place the private health sector, with its heavier reliance on direct fees, at a competitive disadvantage with the public health system". The same argument was used to exclude education.

Mr Morrison said on Monday that health and education we excluded for "very practical reasons" and "those practical issues remain as challenging as they were back then".

As The Australian Financial Review reported last month, the federal Treasury has worked up GST options that were presented to state treasures at their October 16 meeting with Mr Morrison. These include a 15 per cent rate on the current base, a 12.5 per cent rate on the current base, and the two rates on expanded bases.

Mr Morrison and Prime Minister Malcolm Turnbull are insisting that any GST increase would be offset by tax cuts elsewhere to ensure there would be no overall increase in the tax take.

Mr Morrison said returning bracket creep was a priority, while Mr Turnbull reassured voters there would be adequate compensation to make sure those on welfare and the low paid were no worse off in net terms.

"Any changes to the tax system have got to be ones that ensure that there is no disadvantage to the most vulnerable Australians, to less well-off Australians," he said.

FAIRNESS SOUGHT

"We have to make absolutely clear that any changes to the tax system or transfer payment system are ones that are fair, that are seen to be fair across the board."

This indicates pension and other welfare top-ups along with compensatory tax cuts.

However, the two states most amenable to an increased GST, South Australia and NSW, reminded the government that filling funding gaps in health and education were the original priorities for increasing the tax. SA Labor Premier Jay Weatherill pointed to the $80 billion funding cut to the states for health and education in the 2014 federal budget with the suggestion the states think of alternative funding proposals.

This was seen as a push to garner support for an increased GST and Mr Weatherill reiterated on Monday that he was not going to stick his neck out just so the revenue could instead be used to fund election-year tax cuts for the federal government.

"You can't rip $80 billion from our budgets and then beg some sort of tax measure to fix up the problem," he said.

However, Mr Weatherill said both tax cuts and extra funding for health and education could be provided if the government looked at broadening the rate and base of the GST, as well as looking at other measures, including superannuation tax concessions.

"That gives you a broader canvass on which to work," he said.

As well as super, the Premier urged a firmer hand against multinational tax evaders, and placing the GST on financial services, the latter of which would raise up to $4 billion a year.

Mr Turnbull said on Monday that his preference was for an election in September or October, which means could be the centrepiece of the May budget.

Mr Weatherill chipped his federal Labor counterparts, saying he had yet to see from them a proposition that would fill the funding gaps facing the states.

NSW Liberal Treasurer Gladys Berejiklian repeated her support for a 15 per cent GST on the current base, arguing this would provide enough to compensate those on $100,000 and less and address the funding shortfalls.

"Our first priority remains addressing the looming fiscal gap faced by all states and the commonwealth over the next 20 years as a result of our growing health funding needs," she said.

The government has not released the revenue estimates from the GST scenarios Mr Morrison presented to the states. KPMG has done some modelling which finds, for example, that the current 10 per cent GST extended to fresh food, health and education would raise an additional $12.1 billion this financial year.

A 15 per cent GST based on current exemptions would raise an additional $26.0 billion this financial year.

This would be enough to abolish insurance taxes, stamp duty on motor vehicles and 80 per cent of conveyancing stamp duty.

"Any remaining additional GST revenue is returned to households through personal income tax cuts and welfare payments," KPMG says.

Federal Nationals MP David Gillespie costed a New Zealand-style model that would extend a 15 per cent GST to health, education, fresh food and other exempt areas. This would generate an extra $65.6 billion in 2017-18.

Mr Morrison thanked Mr Gillespie for his efforts but said it was at "the pretty extreme end of the options that you can technically consider".