A standing committee report, tabled yesterday, recommends the government abandon its plans for a $3.9 million overhaul of the workshop for sole use by printmaker Megalo.

A majority of the committee found the site, which has been the subject of a bitter dispute in Canberra's arts community, should be kept as a multi-use centre for music, art and performance.

But the government is unlikely to back down from its plans to redevelop the space into a print studio and has been called on by Megalo to reject the recommendations.

Megalo's artistic director Alison Alder said: ''We urge the government to stand firm and proceed with what is a really good, well thought-out decision for the use of the Fitters Workshop … It was allocated to Megalo.''

The report concluded that the workshop had acoustic qualities suitable for musical performance, particularly choral music, ''which justify the re-examination of the decision to convert the building for use exclusively as a print studio''.

The committee said the government should immediately look for a new site for Megalo and that funding set aside to convert the workshop be used to construct a purpose-built facility for the visual arts group.

The report said the government should also re-open its planning process for the Kingston Arts Precinct to incorporate the Fitters Workshop as a multi-purpose venue.

Ms Alder said, ''It means that once again we're in a state of limbo.

''Obviously we're very disappointed.

''I think a multi-purpose space is a very soft option. It will be just another community hall. The evidence presented in the inquiry demonstrated that the space only suits a very narrow range of musical performances and it severely limits any other activity.''

The ACT government promised the space to Megalo in 2009 and the $3.9 million overhaul is planned to adapt the building to the needs of the visual arts group.

But Canberra's choral music community are contesting Megalo's move to the workshop, arguing the fit-out would destroy the ''unique musical space'', and it should be set aside as both an exhibition space and concert hall.

Chris Latham, director of the Canberra International Music Festival, who has described the space as one of Canberra's rare treasures, said the report was encouraging.

ANU Choral Society immediate past president Helen Moore said it would be foolish of the government not to take the opportunity to ''right a wrong''.

''There is now documentary evidence that shows that this process was not transparent and was not undertaken properly,'' Ms Moore said.

''The government would be stupid to dig in around an issue where it's perfectly clear they made a very bad mistake.''

Arts Minister Joy Burch said yesterday the report was not persuasive and showed the site was only suitable for ''a narrow range of music''.

Ms Burch said the government's long-standing plans were to find a permanent user that was held in both national and international regard and ''we believe that user is Megalo''.

''We've got the report, we'll consider the report's recommendations and we'll provide a response,'' she said.

''But on first reading, I don't think there's a very persuasive argument.''

But Greens arts spokeswoman Caroline Le Couteur accused Ms Burch of driving divisions in Canberra's arts community.

''A multi-use arts venue will have benefits to a broader range of the community for concerts and exhibitions,'' she said.