Does atomic functions on same memory location cause an performance issue?

Will having all invocations incrementing the same atomic counter be slower than not doing that? Sure. How much slower? That depends on many factors, but it's hardly going to be a crippling performance issue.

The whole point of atomic memory operations is that there is some hardware mechanism that allows them to work reasonably efficiently. Not as efficiently as bumping a local variable of course, but they shouldn't be assumed to cause a massive performance penalty.

On some hardware, atomic counter operations aren't even memory operations. AMD implements them as specialized hardware within their shader system, such that atomic counter operations don't touch actual memory storage until after the rendering process that uses them is complete.

Obviously, the best thing you can do is profile on your hardware-of-choice, but failing that, I would see no reason not to use this mechanism as you see fit.