What is Invoice Reference Number: Meaning, Benefits and How to Generate?

The Government of India issues an invoice reference number (IRN) which is a 64-character alphanumeric number. It helps the government to track and identify e-invoiced shipments across the country.

Currently, the e-invoices that a business generates will be valid only when these invoices have a reference number attached to them. Read on to know more about how these reference numbers are generated and the parameters needed to generate IRN.

The Invoice Registration Portal (IRP) under the Central Board of Indirect Taxes and Customs generates a 64-character unique number popularly referred to as invoice reference number (IRN).

The reference number is distinct for every e-invoice raised on the GSTN portal for every financial year. Every e-invoice raised by vendors or suppliers must contain this reference number as it will help the tax authorities and other government agencies to authenticate the genuineness of transactions.

An IRN is generated as per the hash algorithm on the GSTN portal. The e-invoice system mandates that every document, like invoice bills and credit or debit notes, must be uploaded to the Invoice Reference Portal (IRP) of the GST system. This portal validates the documents and generates an IRP number which is distinct for every transaction.

The IRN in invoices has several benefits for business houses as well as government authorities. The Indian government has mandated the use of these reference numbers on every invoice raised by a company having a turnover of more than 20 crore during one financial year.

The importance of this system is as follows:

• Tracking of Payments: Businesses can track their invoices and incoming or outgoing payments by looking at the reference number provided with every invoice. Proper tracking of payments will allow companies to manage their finances efficiently. They can track customers who pay late habitually and remind them to make payments at the earliest. As every reference number on e-invoices is unique, the time and effort to track unfulfilled payments will also reduce.
• Avoid Duplicate Payments: With an IRN, companies can also take care of the menace of duplicate payments. If a company raises an invoice for one good or service twice, it can send a wrong message to its clients. This can also lead to loss of genuine customers because of the company's inability to properly monitor the payment process. IRN is a unique alphanumeric number which reduces the chances of raising incorrect invoices. This will ensure a more sustained and trustworthy relationship with the clients.
• Helps Tax Authorities: IRN makes the work of tax authorities easier as well. It helps them to filter out the fake invoices created and take necessary actions. In India, lakhs of e-invoices are issued by companies every day, and manual checking would have led to unnecessary delay and harassment of genuine enterprises.

The hash algorithm is an integral part of the GSTN portal, which generates the invoice reference number. This algorithm works to convert any string of characters or message into a unique set of numbers which won’t indicate the original message or characters.

You can say that the hash algorithm is the fulcrum of the entire e-invoicing system because it generates the IRN on the invoice reference portal.

Here is the information that will be required to generate IRN:

• Supplier GSTIN
• The financial year in the format – YYYY-YY. For example, 2021-22.
• Invoice, credit or debit note number of the supplier

A company will need to generate the invoice reference number when they are raising an e-invoice, debit or credit note to their customers. Any company having a turnover of more than 20 crore in one financial year is required to get IRN on every e-invoice issued by them.

Companies can generate e-invoices on any invoice-related software that they use for business operations. For the generation of IRN, they have two alternatives which are as follows:

• Companies can use offline Excel utility tool.
• Companies can use the Invoice Registration Portal or GST suvidha providers.

In both cases, the invoice portal will re-check the uniqueness of the IRN generated by tallying it against the central GST registry. The GST registry is a database of all IRNs generated.

As per this article, we can safely assume that invoice reference number has played a crucial role in ease of doing business. The automated system has replaced old age manual entry processes, which were prone to errors and inefficiencies. This detailed guide will provide all necessary information about reference numbers of invoices and assist businesses in adopting this practice.