KUALA LUMPUR (REUTERS, THE STAR/ASIA NEWS NETWORK) - Malaysia's inflation rate fell below 1 per cent in June, which was the first time in 40 months, following the withdrawal of a goods and services tax (GST), government data showed on Wednesday (July 18).

The inflation rate in June was at 0.8 per cent, its lowest since February 2015, when it was at 0.1 per cent.

The figure was below the 1.3 per cent forecast by a Reuters poll and sharply down from the 1.8 per cent recorded in May.

The scrapping of GST as well as discounts and price control measures during the Hari Raya Aidilfitri celebrations had a significant impact on prices of goods in June, the Statistics Department said in a statement.

"The impact was due to the zero-rated GST from June until August. Another factor was the discounted price by retailers in conjunction with Aidilfitri, Hari Gawai Dayak: Gaya Guru Gerai Nyamai and the implementation of the Price Control Scheme for 22 selected items in conjunction with Hari Raya Aidilfitri," the department said.

The new government led by Prime Minister Mahathir Mohamad, put in office after the May 9 general election, scrapped the 6 per cent consumption tax on June 1.

In June, costs were down across all goods and services except for the transport index, which rose 5.5 per cent from a year earlier due to higher domestic fuel prices, data from the department showed.

Malaysia's central bank left its key interest rate unchanged at 3.25 per cent in its last review, citing slowing inflation and steady economic growth.