That actually works quite well. I once built a templating engine for Terraform files based on JQ that reads in higher level Yaml definitions of the resources that should be created and outputs valid Terraform Json config. The main reason back then was that you couldn't dynamically create Terraform provider definitions in Terraform itself.

Later on I migrated the solution to Terramate which made it a lot more maintainable because you write HCL to template Terraform config instead of JQ filters.