All About Invoice Reference Number (IRN)

E-Invoicing was introduced in India in order to bring standardisation to all e-invoices that are generated. Registered users need to upload all B2B invoices on the e-invoice portal, where they are authenticated and then stored for further use by other portals that are part of the GST Network (GSTN). As part of the authentication, a unique identification number known as the Invoice Reference Number is also generated for each e-invoice.

In this article, we will provide you with a comprehensive understanding of IRN and its implications for GST compliance.

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What is the Invoice Reference Number?

The Invoice Reference Number (IRN) is a unique 64-digit identification number assigned to each e-invoice generated in India. It is generated and assigned by the Invoice Registration Portal (IRP) to every invoice/debit note/credit note. IRN is also sometimes referred to as ‘hash’. IRN plays a crucial role in ensuring the authenticity of GST invoices and facilitates the matching of input and output tax credits for taxpayers. Every invoice sent by a supplier to the recipient must bear the IRN. Tax officers will use this number to identify whether the transaction is genuine or not.

What is Hash Generation Algorithm in IRN?

The hash generation algorithm in IRN is a function used to convert any message or string value (i.e a string of alphanumeric values, and some special characters) into number values. This hides the original message of the string value. The GSTN uses this algorithm as part of the process of standardising e-invoicing.

What Parameters are Used to Generate an Invoice Reference Number (IRN)?

IRN is generated by converting characters into numbers using a hash generation algorithm. This algorithm will be applied to the following three parameters:

• Supplier GSTIN
• Supplier’s document number. 
• The financial year in yyyy-yy format. For example, 2021-22

Note that this step is optional. It is also possible for sellers to generate the number outside of the portal and upload it along with the invoices.

When is The Invoice Reference Number (IRN) Generated?

The IRN generation becomes necessary at the time the seller issues the invoice, credit note, or debit note. However, beginning on October 1, 2020, taxpayers with annual revenue of more than Rs. 500 crores would have a 30-day grace period for creating an IRN. This grace period is in effect for invoices generated between October 1, 2020, and October 31, 2020.

It is important to note that no generation of B2B invoices happens on the e-invoicing portal. Rather, you are simply uploading the B2B invoices you have already generated using an accounting software or billing software. Moving forward, any software used to generate the invoices must meet the standards and parameters that have been prescribed. Using a GST Accounting and Billing Software will be beneficial to stay compliant with e-invoicing and GST.

Conclusion 

The Invoice Reference Number (IRN) is a unique identification code assigned to every invoice generated under the GST system in India. It helps in reducing instances of tax evasion, promoting transparency, and simplifying the invoicing process for businesses. As per the recent regulations, e-invoicing is now mandatory for businesses with an annual turnover of more than Rs. 10 crores, so more and more businesses are slowly being brought into its purview. This makes it necessary for business owners to understand the system of e-invoicing in order to stay GST compliant.