In terms of performance, Cloud SQL and database on GCE VM should be close. It mainly depends on how large the instance you plan to use. Cloud SQL does have many of its own benefits. It's worth checking this FAQ page and this Stackoverflow post when you make your decision.
-- For connection to Cloud SQL, you can either use Cloud SQL Proxy or direct IP connection. As long as you're using connection pooling in Proxy connection, the performance should be close to direct connection. Check https://github.com/GoogleCloudPlatform/cloudsql-proxy/issues/87, the post on Jul 28, 2017.
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