The NT government is moving to circumvent a Darwin Council smoking ban, which it believes will hurt small businesses and kick them "when they're down".

A smoking ban in downtown Darwin could drive out small businesses, the Northern Territory government says, as it moves to sidestep such a ban imposed by the city's council.

Business Minister Peter Styles said the Director-General of Licensing was in the process of removing a clause from NT Government liquor licences stipulating that licensees had to comply with council policies, to exempt them from the smoking ban in Smith Street Mall.

"I am very concerned about the impact (the ban) could have on the viability of small businesses operating both in the CBD and outside," Mr Styles told a business forum on Wednesday.

"Council's no-smoking policy conflicts with the Territory government's position to allow smoking in outdoor areas, in a regulated environment. Our policy has proven successful over a number of years and has been embraced by venues, smokers and non-smokers alike," Mr Styles said.

He said for small businesses struggling with an economic downturn, the ban "will be like kicking them when they're down".

"I am not condoning smoking in any way... (but) it is not an illegal activity. We should accommodate (smokers) in a regulated environment and in a way that does not disadvantage local businesses," he said.

But the Heart Foundation said Mr Styles' claims that there could be a consequence for businesses "seem to have no basis in evidence".

It pointed to a recent World Health Organisation report that showed that on "average business remains at the same level or even increases after the smoking bans".

International studies on sales and employment before and after smoking bans were implemented "have found either no impact or a positive impact within the hospitality sector", the Heart Foundation's NT CEO Simon Dixon said.

Smoking was a major risk factor for cardiovascular disease, and heart disease was the leading cause of death in the Territory, he said, and smoking in the NT was almost twice as prevalent as the national rate.

"There is no safe level of second-hand smoke, and as a community we have a responsibility to protect the whole population from the negative impact of tobacco smoke," he said.

The Australian Medical Association last month rated the NT as putting in the least effort to reduce smoking of any Australian jurisdiction.

"It seems that reducing smoking and its harms is not a priority for the NT government," AMA President Professor Brian Owler said at the time.