Hello,

No, your state counselling would not be cancelled as both are conducted separately. You can choose to appear for both . But what what is important to remember is that supposedly you got a seat in All India Quota and submitted your documents in respected college then if you appear for state counselling and somehow you are offered a seat then the previous seat would be cancelled and upgraded to the new college and all your documents would be transferred to the new college.

Hope it helps.

Good luck.