Multiple-Input Multiple-Output (MIMO) technique with Index Modulation (IM) over sub-TeraHertz (sub-THz) bands represent a promising solution to design new wireless ultra-high data rate systems. However, the system design over sub-THz bands suffers from many technological limitations and severe RF-impairments such as low output power, limited resolution of high-speed low-power Analog-to-Digital Converters and important Phase Noise (PN) introduced by the Local Oscillator (LO). In this paper, different modulations schemes with Generalized Spatial Modulation (GSM) are compared from different perspectives while considering the sub-THz impairments. The effect of PN has been investigated for these modulation schemes in sub-THz channels using uniform linear and rectangular antenna arrays. The obtained results reveal that QPSK-GSM system is the best combination compared to GSM systems with any other M-ary modulation scheme (e.g. PSK, DPSK, QAM, PAM). Compared to DQPSK-GSM and 4PAM-GSM at 12bpcu, same number of receive and activated transmit antennas, the QPSK-GSM system offers a gain ranging from 3.4 dB up to 5 dB. The results reveals that low to medium residual PN in distributed oscillator architecture can be tolerated when using GSM-QPSK without phase noise mitigation. Thus, enforcing the GSM to be a promising candidate for ultra-high wireless data rate communication in sub-THz bands.