I have worked in Gasa for almost three years. I assumed Gasa(mGarsa) as Land of blacksmiths going by Dzongkha spelling. I was not sure. During one of the minister’s visit, he implied, Gasa is land of happiness. It confused me more. Now I am almost sure that Gasa means land of smiths. There are two beliefs why Gasa is called Gasa. People of Gasa were believed to be skilled in that arts of iron including Druthob Terkhungpa. Those who wonder who Drunthob Terkhungpa is, he was founder of place where Gasa Dzong is located though he was known mostly as meditation master. Druthob Terkhungpa was also ancestor of Gon Hoptsho Lam from whose lineage came first Druk Desi Tenzin Drukgay. He was known as Norbu Paldan-disciple as well as son of Tshangpa Gayray. He mediated at the place called Gom Terkhung which was place full of hot springs and sulferous geysers which was also home of deity Gyengen Chenpo probaby Damchen Gomo. He tamped Damchen Gomo, the guardian deity of Gasa/Gon. Thus he was known as Drubthob Terkhungpa. He brought Drukpa Kargyu to Bhutan before Phajo Drugom Zhigpo.
It is also believed that the main occupation of people was iron crafts. During the war launched by Paro and Wangdue people against Gon people during period of internal conflicts, the original people of Gasa fled to the north and people from Paro and Haa settled there who were good blacksmiths. This seems less likely as one of the researchers pointed out that Gasa was known by its name as during arrival of Zhabdrung.
Another explanation given was that Gasa was named after its local deity Drak Nyerpa who was also known by anthor name Gangsel. The deity Gangsel was later named as Tashi Thongmoen. Gasa could be corrupted form of Gangsel. Later when Gasa Dzong/monument was built, it was named in dedication to its deity as Gasa Tashi Thongmoen.
Source: Ways of Knowing Names by Dr. Jagar Dorji and The House of History of Bhutanese Gentry from 13th to 20th Century by John A. Ardussi