Reserve 1 tbsp. dry gelatin mix. Combine remaining dry gelatin mix with flour and baking powder. Beat butter in large bowl with mixer until creamy. Add granulated sugar; beat until light and fluffy. Blend in egg and vanilla. Gradually add flour mixture, beating well after each addition.
Shape dough into 30 (1-inch) balls. Place, 2 inches apart, on baking sheets. Flatten with bottom of clean glass.
Bake 8 to 10 min. or until edges are lightly browned. Cool on baking sheets 1 min. Remove to wire racks; cool completely.
Whisk powdered sugar, reserved gelatin mix and milk until blended; spread onto cookies. Top with sprinkles.