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Kerala, who needed to win atleast by two goals to qualify, suffered a huge blow as Services' Vikas Thapa scored the lone goal in the 62nd minute.
The South Zone qualifiers of the 74th Santosh Trophy National Football Championship which was to be held in Kochi from October 14 has been postponed.
Hosts Kerala, Tamil Nadu, Karnataka, Andaman and Nicobar, Puducherry, Telengana and Andhra Pradesh are the teams in the fray.
The 20-member squad announced on Wednesday features seven Under-21 players.
Defender Vibin Thomas drew first blood for Kerala with a header in the 44th minute.
Six-time champions Kerala have been clubbed along with Delhi, Services, Meghalaya and Jharkhand in Group A.
Results 131-137
