Yes, the upgrade kit is developed to work with the CFS.
The upgrade kit has parts for K1C, K1 and K1 max models. When you installed it, it adds new extruder with a filament sensor and a cutter. Both are essential parts for the CFS. CFS is a proprietary Creality solution you cannot use it with typical Kiipper 3D Printer, only Creality flagship models are compatible with this unit.
The upgrade kit includes an USB drive with compatible firmware upgrade. In addition to Klipper settings, supporting the CFS, it contains several Linux daemons (services), which support proprietary binary protocol between Creality printer and the CFS unit, and printer screen GUI changes, enabling CFS control.