More than 400 people remained hospitalised, 200 in serious condition, city officials said. Eight suffered life-threatening injuries, local media said.
Police recommended criminal charges against the organiser of Saturday's party, as well as two technicians, at the Formosa Fun Coast theme park in suburban Taipei.
"It's still not clear what happened, but there were a number of people smoking and the weather was warm," New Taipei City news department head Lin Chieh-yu said. Temperatures around greater Taipei topped 36 degrees Celsius (96.8 F) before the party.
"Whether it's corn starch or flour starch, this kind of stuff, no matter how long it's been around, if it's in dense quantities and if it's hot, it can catch fire," Chou said. She said her 4-year-old company has been questioned by police and health officials but not considered at fault.
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"We didn't know what the buyers were going to do with it or how much they would use," she said. "It might have been supplies for a whole year."
Coloured powder is often thrown on revellers during the annual Holi celebrations in India and Nepal, a Hindu festival, but the powder at Saturday's party was made in Taiwan, Chou said.
Taiwan police recommended charges of professional neglect and public endangerment yesterday for party organiser Lu Chung-chi, who was arrested but released on bail of 1 million Taiwan dollars (USD 32,000) bail and restricted from leaving the island, a New Taipei City police spokesman said.
Police also recommended charges for the stage hardware technician and the person responsible for shooting off the powder. Each was given bail of 300,000 Taiwan dollars.
Officers questioned another two involved in the event but did not recommend charges, said Yan Bo-jen, news liaison with the Luzhou Precinct of New Taipei City Police Department.