The RFID based communication between objects within the framework of IoT is potentially very efficient in terms of power requirements and system complexity. The new design incorporating the emerging chipless RFID tags has the potential to make the system more efficient and simple. However, these systems are prone to privacy and security risks and these challenges associated with such systems have not been addressed appropriately in the broader IoT framework. In this context, a lightweight collision free algorithm based on n-bit pseudo random number generator, X-OR hash function, and rotations for chipless RFID system is presented. The algorithm has been implemented on an 8-bit open-loop resonator based chipless RFID tag based system and is validated using BASYS 2 FPGA board based platform. The proposed scheme has been shown to possess security against various attacks such as Denial of Service (DoS), tag/reader anonymity, and tag impersonation.