Must I admit having started (but not finished) an MS when applying for a competitive PhD position? I spent almost two years in a chemistry master’s program. I did many lab rotations where I learned many techniques, and I even made progress on my master’s thesis (though I never defended). Ultimately, however, I could not complete the required courses, and so the university asked me to leave the program (they suggested I transfer my credits somewhere else). After that, I worked as an research assistant in a lab where they only required a bachelor’s degree. I’ve been here for two years and am going to publish a few papers soon as a first author.

Now I have applied in a prestigious scholarship in Australia where they only require a bachelor’s degree. This scholarship will fund my PhD in chemistry. I was selected for further consideration. There are many steps (many committees, subcommittees, etc.), but I believe I am likely to be selected. 

My question: I have not yet disclosed that I started but did not finish a master’s program. Should I disclose this? Previously I preferred to be honest and lost so many opportunities – they always seemed to be supportive but never ended up selecting me; I am worried the same thing will happen here. I do not want to lie or hide, but at the same time I am afraid I might lose this chance too. I really have no option left. If this goes on, I think I can never get into a PhD for being honest. Even I have tried to transfer my credits but its kind of impossible.

PS- I did not submit my CV yet as they chose me from my expression of interest and my publication lists.
You will need to disclose your enrollment in this unfinished master's and provide whatever transcripts or other documentation might go with that.  It's up to the scholarship committee to decide whether this disqualifies you.  If it's later discovered and they decide it was disqualifying and should have been disclosed, you're not going to want to try defending that since the whole point of not telling them is so they wouldn't know.

It's possible they may consider you to be still within their definition of holding a bachelor's only.  Lots of people start things, then don't finish for lots of reasons.  If you only have a bachelor's, there's a good argument that that's all you have and that you should meet their definition.  The committee may also be a lot more interested in what you did instead of finishing the master's.

Good luck.  But you will need to disclose.