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.
Trijoy Dias netted the winner in the 57th minute in front of the home fans.
Kerala, who have nine points from three matches, meet hosts Goa in their final game on Tuesday.
Kerala, who blanked Gujarat 3-0 in their opening Group A match, have six points from two matches.
Akbar Sidhique scored a brace for the seven-time champions.
Kerala will open their campaign against Gujarat on October 11 in the first phase of the championship.
Kerala are placed in Group A along with hosts Goa, Jammu & Kashmir, Chhattisgarh and Gujarat.
Jammu & Kashmir, Chhattisgarh and Gujarat are the other teams in Group A.
Balan, who is an Asian Football Confederation A Licence holder, coached Kerala to glory in the 2018 edition.