Bikash Thapa's 63rd minute strike secured former champion Services' entry into the main rounds and sealed Kerala's fate.
Kerala had drawn the two previous games against Telangana and Puducherry.
In another match, Telangana was held to a goalless draw by Puducherry, ending the team's hopes of advancing.
A victory for Kerala or a draw would have helped Telangana qualify.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)