In Notepad++, the XML Tools plugin's Pretty Print function indeed only adds indentation to the XML file to make it more readable, but it does not apply any syntax highlighting or colors. The color coding in Notepad++ comes from the syntax highlighting feature, which is separate from the indentation.
Ensure XML Syntax Highlighting is Enabled:
Open your XML file in Notepad++.
Go to the Language menu at the top.
Select XML from the list of languages.