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India has repeatedly rejected China's territorial claims over Arunachal Pradesh, asserting that the state is an integral part of the country.
The claim comes days after India rejected Beijing's objection to Prime Minister Narendra Modi's visit to the state.
After 120 minutes of goalless action, both sides converted most of their kicks, but Kerala's substitute Sujith V R missed the decisive one.
The match will kickoff at 7 pm on March 5.
Services outplayed Assam 2-0 in the early kick-off to seal their place in the quarterfinals.
Kerala, coached by Satheevan Balan, have picked a 22-member squad. Nijo Gilbert has been named captain.
The tournament will be held in Arunachal Pradesh from February 21 to March 9.
The new format will see the top four teams from each group advancing to the quarterfinals.
The seven-time champions, who finished second behind hosts Goa in Group A, qualified as one of the three best second-placed sides.
Purkayastha and HR head Amit Chakravarty were arrested on Tuesday by the Special Cell of the Delhi Police.