Some farmers threw away milk in protest earlier this week, saying milk collecting firms were not buying.
Lower prices however would encourage the consumption of fresh milk and reduce protein malnutrition among poorer sections of the population.
At the moment a 400 gram pack of milk powder is retailed around 260 to 265 rupees.
The finance ministry said that the tax increase was to "encourage and protect local dairy industry as well as to discourage the importation of milk powder."
Many Sri Lankan dairy farmers, who are politically backed with protectionist taxes imposed on citizens to block their access to cheaper milk, own low yielding cows, though there have been attempts to introduce high yielding cows.
Import taxes work by inflicting harm of the poorest sections of the population as richer citizens would continue to consume despite high prices.The finance ministry said 84,000 metric tonnes of milk powder were being imported annually at a cost of 36 billion rupees.
Milk is a popular whitener for tea. Some poorer Sri Lankan citizens buy powder by the spoonful from small shops.
In Sri Lanka taxes on any food can be raised by the state without going to parliament by a mid night gazette.
According to data published in Sri Lanka's Ceylon Today newspaper last year the state charged taxes of 2.4 billion rupees on milk powder not containing added sugar and a further 618 million rupees from processed cheese.
The finance ministry said taxes on infant milk powder will not be raised.
The tax increase in imported milk powder comes only weeks after Sri Lanka's consumer affairs minister refused importer requests to raise the price of milk after the rupee exchange rate fell from 110 to 130 against the US dollar.
