Difference between creating ViewModifier and View extension in SwiftUI

All of the approaches you mentioned are correct. The difference is how you use it and where you access it. Which one is better? is an opinion base question and you should take a look at clean code strategies and SOLID principles and etc to find what is the best practice for each case.

Since SwiftUI is very modifier chain base, The second option is the closest to the original modifiers. Also you can take arguments like the originals:

extension Text {
    enum Kind {
        case primary
        case secondary
    }

    func style(_ kind: Kind) -> some View {

        switch kind {
        case .primary:
            return self
                .padding()
                .background(Color.black)
                .foregroundColor(Color.white)
                .font(.largeTitle)
                .cornerRadius(10)

        case .secondary:
            return self
                .padding()
                .background(Color.blue)
                .foregroundColor(Color.red)
                .font(.largeTitle)
                .cornerRadius(20)
        }
    }
}

struct ContentView: View {
    @State var kind = Text.Kind.primary

    var body: some View {
        VStack {
        Text("Primary")
            .style(kind)
            Button(action: {
                self.kind = .secondary
            }) {
                Text("Change me to secondary")
            }
        }
    }
}

We should wait and see what is the BEST practices in new technologies like this. Anything we find now is just a GOOD practice.