The "Convert uploaded files to Google Docs editor format" Google Drive option is designed to make it easy for Microsoft Office users to convert to Google Docs, Google Sheets, and Google Slides. This option is described in this article. However, when this option is enabled it will prevent .txt template files from uploading to Google Drive correctly.
When the "Convert uploaded files to Google Docs editor format" option is enabled, Google Drive automatically converts uploaded files of type .doc, .docx, .html, .txt, or .rtf to Google Docs format. If you upload a .txt template file while this Google Drive option is enabled, it will convert the uploaded template file from .txt to Google Docs format. This will make the template file unusable as a .txt template file.
To avoid this problem you must disable the "Convert uploaded files to Google Docs editor format" Google Drive option while uploading .txt template files.
Open the Chrome browser
Enter https://drive.google.com/drive/my-drive in the navigation bar and hit enter.
Click the "Settings" gear icon on the top right.
Uncheck the box next to “Convert uploaded files to Google Docs editor format”.