Information minister Keheliya Rambukwelle said the cabinet of ministers had approved the tax change following a proposal put forward by the livestock ministry.
The proposal said Sri Lanka has reached 35 percent 'self sufficiency' in milk production and 100,000 dairy cows are needed to boost the national herd to be self sufficient.
Sri Lanka's own cows yield low levels of milk, which has kept the island's milk prices high.
The government will also raise the farm gate milk price to 50 rupees a litre giving effect to a 2011 budget proposal.
A self-sufficiency drive and high agricultural protection has increased food insecurity in the country driving prices up higher than the world.
Steep rises in prices are seen due to local crop shortfalls and at times of global commodity bubbles.
The most recent crisis has occurred in raw coconuts due to high import duty protection of edible oils, which has increased domestic production of coconut oil consuming more raw coconuts.
Gl